How does a JV work with both parties on title if one party defaults on a personal residence or other property

[CraigSmith]

Hi everyone,

I have been reading all the posts here for some time now and it is such great help and advice!!

My question is if I get involved in a joint venture with someone that has another property of their own; am I at risk of losing the JV property if that someone defaults on their other property.

Thanks in advance

Craig

 

[Thomas Beyer]

QUOTE (blindedguy @ Nov 4 2008, 11:11 PM) Hi everyone,

I have been reading all the posts here for some time now and it is such great help and advice!!

My question is if I get involved in a joint venture with someone that has another property of their own; am I at risk of losing the JV property if that someone defaults on their other property.

Thanks in advance

Craig
are you the money partner ? yes, if he ends up in a bankruptcy you could lose all or some of your investment $s .. although a JV can be structured such that you are protected assuming the equity in the jointly owned asset is strong enough ! If he has to sell at a low price to clear off other debt than you will be affected !!!

Consider opening a corporation to hold the asset where YOU hold the voting shares only and both parties hold non-voting shares to share profits ! Even if he goes bankrupt you are protected !

 

[GarthChapman]

I am not an expert in this, but here`s my 2 cents.

To add to Thomas` comment above, every Corporate Unanimous Shareholders Agreement I have ever read includes a clause (normally in the Buy/Sell Agreement section) stipulating what happens in the event one or more partners goes into bankruptcy, receivership, etc. Although I don`t think there would be anything you could do that would protect against your partner`s creditors suing your jointly held corporation for the partner`s share of equity. A Limited Partnership, correctly formatted, might offer some better protection, in that a Limited Partner`s liability is limited to his/her investment, so I wonder if the reverse is also true.

I recommend you post this question in the `Ask an Expert - Legal` sub-forum to get some expert advice.

 

[CraigSmith]

Great advice guys. I will continue my due diligence along those lines.

craig