joint ventures for real estate developmentJoint ventures, which allow companies and individuals to combine resources for the purpose of pursuing a specific business project, are distinct from partnerships which conversely provide for an ongoing business enterprise. Furthermore, in joint ventures, each party has the ability to operate independent businesses without violating fiduciary duties to the party involved in the joint venture.

Admittedly, the difference between joint ventures and partnerships can be a bit confusing and there is no bright-line distinction between the two. This can be the case particularly when joint ventures are used to define large, multi-faceted projects that will be completed over an extended timeline. For instance, in summer 2016, Hovnanian Enterprises, Inc., a national homebuilder, and GTIS Partners LP, an international real estate private equity firm, announced a joint venture agreement to “design, construct, and sell homes” on over 2,000 lots situated across thirteen states on both coasts of the United States. The joint venture agreement stated that 75% of the $160 million of capital needed to complete the joint venture would come from GTIS Partners, with the remainder coming from Hovnanian Enterprises, which will manage the day-to-day operations of the venture. Though both parties detailed in the above will be designing, building, and selling homes together on an ongoing basis over a number of years, this is not a partnership as their actions are focused only on the 2,000 lots specified in the agreement, and both parties will continue running their own businesses separately from each other.

Whether your business relationship should be defined as a joint venture or partnership, Your Contract Lawyer can help you protect your interests with a well-defined agreement appropriate to the arrangement.