Lawyer Says it`s not a JV aggreement

[KMcFarlane]

Hello REIN members,

Having just completed the last Calgary Quickstart and finished reading both REIN books. I am currently working on my first JV agreement. I have a partner lined to cover the down payment and closing costs and I will qualify for the mortgage. All other aspects of my team are in place, with the exception of a Lawyer.

I will be meeting with a prospective Lawyer next Tuesday for lunch to discuss interests, goals and investment experience. However, over the phone he asked a few questions and determined that, it wasn`t a JV aggreement that I needed. I`m not doubting his knowledge, I just found this confusing as I seem to have all things arranged typically in a JV.

Following are the questions he asked and my answers:

Who is funding my downpayment? "Business Partner"
What does he do? "Owns an Electrical consulting firm (Self Employed)"
How much do I make anually? "$$$$$"
Who is will qualify for financing? "Me & My Girl Friend - Pre approved"

This is where he determined it was no longer a JV aggreement, I am a little puzzled by his comment. And was hoping someone might be able to provide some insight prior to my meeting next week. I feel like I`m in a grey area

Comments would be appreicated.
Cheers,

 

[markl]

I am just wondering what would he call it? Sounds like a JV I have done before and many other people have as well. Maybe your question on here should be for a RE lawyer in Calgary who also invests.

But still would be quite interested to know what he would call the agreement maybe he just wants to use another name or he himself is unsure with what you plan to do.

 

[RussellWestcott]

Howdy, first of all I want to state I am not a lawyer... although I play one on T.V.

Make sure you seek confident legal advice in your situation (which sounds like you are)

You may want to specifically get the reasons why they do not consider this a JV, or why at that point did he not consider it a JV.

At the end of the day, the Joint Venture will be an agreement between you and your partner. Your lawyers role will be to provide legal advice, and draft up an agreement that protects eveyone`s interest in the deal based upon what you and your partner deem to be the deal.

It is not the role of your lawyer to `judge` the deal or provide Real Estate advice on the deal, but to determine if all parties interests (as you and your partner have agreed to) are protected by your agreement.

I will send this thread to Barry MacGuire (Real Estate lawyer of 35 years), and he can perhaps comment on this. Barry was the person who contributed the entire legal section of the JV secrets program and has completed many JVs himself.

And perhaps we can get a few other legal professionals to comment as well.

Cheers,

 

[KMcFarlane]

Thanks for the comments guys.

I think Russell has a good point, when I meet Tuesday find out exactly why he feels this may not be a JV agreement.
It`s a preliminary meeting, so if I feel the experience isn`t there, I have no obligations at this point.

From what I`m seeing though, there should be no reason that my arrangement would not be a JV. Granted it may not be typical, as there would be three people involved. However, as Russell notes. "the Joint Venture will be an agreement between you and your partner. Your lawyers role will be to provide legal advice, and draft up an agreement that protects eveyone`s interest in the deal based upon what you and your partner deem to be the deal"


I would love to hear any further comments form Barry or any other professionals, in preparation for my meeting.

Thanks again!

 

[BobHudson]

Our lawyer reviewed the "JV Agreement" document that we use and deemed it to be a "partnership". We also consider it a "partnership" for accounting purposes. I can`t say I understand the nuances but I am OK with the partnership document. (It still says JV Agreement on the first page!)

Perhaps your lawyer is thinking along the same lines as mine.

 

[bigbear]

Be careful if it is deemed to be a partnership.

In a partnership, you are fully liable for all the actions of the other partners. If they make a bad business decision in the name of the partnership without your knowledge, then the banks can still come for your personal assets.

I for one totally avoid partnerships. You are asking for trouble.

 

[GarthChapman]

My lawyer always included a description in the JVA that states that the Joint Venture is not a Partnership etc as follows:
1.1 The Venturers hereby create and embark upon the Joint Venture, the affairs of which shall be conducted by them in accordance with the provisions of this Agreement.

1.2 The purpose of the Joint Venture shall be limited to the Lands and specifically to the following activities with respect to the Lands:
1. the acquisition of the Lands
2. the development/repair/renovation of the Lands
3. the rental of the Lands
4. the subdivision and sale of the Lands for the benefit of the Venturers

1.3 No other activities except those relating to the purpose of the Joint Venture shall be undertaken by the Venturers through the Joint Venture.

1.4 Nothing herein shall be read or construed to make the Venturers partners, nor shall anything herein be read or construed to in any way restrict the freedom of each Venturer to conduct any business or activity whatsoever free of any accountability to the Joint Venture or to the other Venturer, even if that business or activity competes with the undertaking of the Joint Venture or of the other Venturer.

Hope that helps,

 

[BarryMcGuire]

This is an easy post to join in on. I agree with both Russell and Garth . No matter what you call your agreement, the lawyer assisting should make sure your concerns are dealt with and your interests are protected. He should not generally make comments on the economics or reasons .
Every JVA should have the type of clause that Garth mentioned confirming that the JVA is not a partnership as a partnership allows acts of one partner to bind all the other partners.

 

[KMcFarlane]

Thanks for all the great comments guys, Barry it was good to see you weigh in,I really appreciate it.

I had a chance to speak with my lawyer yesterday, he confirmed for me that he infact was viewing this as "Partnership" he stated he would base it on the fact that my business partner was self employed. I brought up some of the points that many of you have noted and he still views this as a partnership.

At this point, I don`t think I will be moving forward with him.

If any of you could recomend someone local in Calgary? it would be really appreciated. Barry maybe someone you are affiliated with?

Thanks again.

 

[KMcFarlane]

QUOTE (Chaps @ Nov 12 2007, 03:39 PM) My lawyer always included a description in the JVA that states that the Joint Venture is not a Partnership etc as follows:
1.1 The Venturers hereby create and embark upon the Joint Venture, the affairs of which shall be conducted by them in accordance with the provisions of this Agreement.

1.2 The purpose of the Joint Venture shall be limited to the Lands and specifically to the following activities with respect to the Lands:
1. the acquisition of the Lands
2. the development/repair/renovation of the Lands
3. the rental of the Lands
4. the subdivision and sale of the Lands for the benefit of the Venturers

1.3 No other activities except those relating to the purpose of the Joint Venture shall be undertaken by the Venturers through the Joint Venture.

1.4 Nothing herein shall be read or construed to make the Venturers partners, nor shall anything herein be read or construed to in any way restrict the freedom of each Venturer to conduct any business or activity whatsoever free of any accountability to the Joint Venture or to the other Venturer, even if that business or activity competes with the undertaking of the Joint Venture or of the other Venturer.

Hope that helps,

Great Info, Thanks Garth!

 

[2HoundsHomeStaging]

I`m so glad this thread came up! Incredibly valuable information. Thanks for the question and the replies!