Joint Venture Agreement (JVA)
I am compel to write this piece in order that landowners deciding to go into JVA will have a better understanding of the risk that they will face with a lopsided agreement.
1. First the issue here is that the Developer will almost get a Power of Attorney as well, read this document very carefully as it is often unclear and inconsistent with the JVA, for example in the PA it provides the donor (landowners) to give up every conceivable power to the Developer (donee) to do what he wishes with the land BUT in the JVA, it also says the Developer has to seek mutual consent to with the landowners. (Preference – change mutual consent to consent from landowner in JVA)
2. The JVA is peppered with things that the Landowner must do but invariably Landowners are not aware of the duties – for example to approve the Developer Plans, Building Plans, appoint Consultant, allotment of units. It seems that the Developer do all this on-behalf or with ‘mutual consent’ of the landowners (by asking for their IC or as PA holder). Landowners must take an active role as all these must be done with your consent, have all consent documented and make sure that meetings are held and references clearly. It is often the case where the Developer will start selling the units as soon as the Building Plan is approved. Make sure you get your LOTs before approving the Building Plan and not a minute later. If you cannot get your preferred LOTS don’t sign approval to Building Plan, once is signed you have no recourse other than get compensation.
3. Did I say compensation ? Opps, JVA often excludes this as Developer is the last person to give you any compensation because he is a businessman. The JVA will often state a specific performance clause, ie you can only ask the Developer to do things that he ‘forgot’ to do and not for money, so if he forgets to give you a LOT then you can ask him (but make sure he did not sale them first hence is important to hold on to the building plan approval until you get in black and white), otherwise you will end up with the leftovers.
4. “More or Less” – this is a term they use in JVA to describe the land they will want to use for the development. Under normal circumstances this term is reserved for land that is unsurveyed however, I see that they (obviously lawyers) adopted this in the JVA or contract. The legal parley for this is that one cannot ask for compensation if it is more or less above the actual, say the final development is more than 10% then the landowner is stuck, suggest to include a limitation (but in no event no more than 5%). Or get rid of this term entirely as it is outdated with modern GPS which can measure the development land accurately. More or less is defined to be ‘slightly different’ in BlackLaw, this means it cannot be a huge difference, I mean if you ask for 1 acs, then it cannot be 1.20 acs. In my view the max is 1.1 or 10% but this is untested in Court.
5. Get everything in black or white, if Developer ask for something say your IC, then you need to get the reason in black and white, in case they use it for something else without your approval.
6. Do a checklist of the things ‘mutual consent’ is needed. Do a timeline to remind yourself to get the things done mutually. (If you can, change the mutual consent to one that consent is needed from you at all times). Appoint yourself as project manager as your interest and rights are at stake.
7. Get a lawyer to review the JVA. Get Developer to pay for this. Inform the lawyer that he is working for you but paid by Developer so his duty is to you, sue him if he fails to do his duty, keep notes of what the lawyer tells you or better still ask him for a ’legal opinion’. This may help as it is in Black and White but maybe couched in legal terms that will protect his interest as well.
8. My view is that a JVA must be fair and this means both parties are well-informed of the terms and their responsibilities. But in most cases, this is not the case until is too late. So I hope this little piece here will help others and not ended up like my client has, in a difficult spot.