Hi there,
A very good friend and I plan to buy a residential property together. We plan to split 50-50 all costs and profits from an eventual sale. We want to ensure that we draw up a proper contract that protects us not only financially, but also ensures our friendship stays intact no matter what.
With the exit clause we are thinking of having it worded along the lines that if one party wishes to exit the property then the other party is given the option of buying that person out, based on current market value (as determined by an independent property valuer). If the party whose buying out the other party can't come up with the $$ within a certain time frame (say, six months), then the property will be taken to market to be sold.
Is this the way it's usually done? Is there a better way of resolving the situation where one partner wants out? Has anyone come across a useful list of things to consider when doing a JV of this kind?
thanks in anticipation,
CarlinHi there
that definately is the sort of thing that is done for an exit clause – the only other thing you may want to think about is what if one party passes away and the other's estate needs to resolve issues – similar principles apply. You might also want to think about what insurance is in place for each of you – to ensure that there is money for any payout or to fund mortgage payments in the event of one party not being able to work.
If you have a joint venture agreement prepared for you – a lot of those sort of issues should be covered.
thanksA joint venture is a legal agreement between two or more parties that come together to generate profit. Generally, each party contributes something of value – perhaps assets, cash or knowledge – in return for a share of the net profit. A joint venture is not a partnership, but a separate legal arrangement. Each joint venture is very unique and so the agreement must be sufficiently detailed and issues it should cover include:
Purpose of the joint venture
Each party’s role and responsibilities
Initial and ongoing contributions that each party makes
Share of ownership and profit/income
Appointment of Manager, detailing duties and obligations
Duration, ie a set project or ongoing.
Dispute resolution
Sale of Interest.Probably best to draft one up yourself covering these issues and then take it along to a Solictor to review and make any necessary changes.
Many thanks for all the advice. We will definitely get a solicitor to look at what we draft.
best wishes,
Carlin
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