Joint venture agreements in real estate are popular in upscale areas in Lagos, Nigeria. It creates an easy way to achieve joint developments and management of properties for individuals or entities who have limited resources but are looking to derive profit from developing properties. Parties to a real estate joint venture are usually the landowner and the financier or developer. The landowner is vested with ownership of land available and suitable for development. However, due to certain limitations, the landowner may not have the capacity to develop the property. Hence the need for someone with the funds and technical know-how. The developer also may not have the funds or access to purchase suitable land in the desired location. However, finding someone with land who is willing to partner is therefore crucial.
When the landowner and the financier or developer meet and agree to terms, then a joint venture agreement is formed. Typically, the joint venture agreement is required to define the terms of the partnership and state the responsibilities, duties and privileges of each party to the partnership. A joint venture agreement can be between two parties. It can also be between more than two parties. For example, the proposed development may require multiple partners for funding.
Essential Parts of a Real Estate Joint Venture Agreement
A joint venture agreement seeks to protect the rights of the landowner and the developer. It also seeks to define the obligations of parties. Hence, a joint venture agreement must specify the details of the land, the type of property to be developed, the source of funds, construction and delivery timelines, and a sharing formula of the proceeds of the joint venture agreement.
Laws Regulating Real Estate Joint Venture Agreements in Nigeria
Joint venture agreements are essentially commercial agreements. Hence, the laws regulating commercial agreements are applicable to joint venture agreements. This means there are no specific statutes. The essential ingredients of a contract must be reflected in the agreement. These requirements are an offer, acceptance and consideration.
Also, the parties must have intended to create legal relations in order for the agreement to be enforceable. Building and town planning laws, environmental laws, and registration of title laws are some of the statutes that will be considered during the construction stage of the project. However, all these laws mentioned only seek to regulate the construction activities and ownership rights, not necessarily the joint venture agreement itself.
What Constitutes a Breach of a Real Estate Joint Venture Agreement in Nigeria
Each joint venture agreement is peculiar and seeks to reflect the intention of the parties. However, the most common breach of contract in joint venture agreements is the failure of the developer to meet specific deadlines.
Also, frustration of contract is a typical situation that may lead to the termination of a joint venture agreement. A good example of frustration could occur where the developer runs out of funds due to insolvency or its inability to properly predict the total cost of construction. This could also arise as a result of uncontrolled inflation that sends prices skyrocketing. A good way to prevent this from happening is to engage a quantity surveyor from the onset as well as other professionals that would help in putting together an itemised costing as well as identifying potential unforeseen expenses. Also, the contract should have a provision that allows the developer to remedy the default in a way that also ensures the landowner derives its full benefits, for example, by assigning the contract to a third party where the developer is unable to complete the project.
What Are the Remedies For Breach of Joint Venture Agreements in Nigeria
Breach of contract in real estate joint venture agreements in Nigeria in most cases happens when the developer defaults. But this is not to say that landowners do not also, in certain instances, take steps that are adverse to the successful completion of the project.
It is, however, essential to note that the remedies for breach of a joint venture agreement may include damages, injunction, restitution or an order of specific performance, depending on what the breach entails.
Resolving Real Estate Joint Venture Agreement Disputes in Nigeria
There are no specialised real estate or construction courts in Nigeria for real estate disputes, so depending on the nature of the dispute, parties can either seek the conventional court or opt for an alternative dispute resolution mechanism. Arbitration is often adopted where the contract is of significantly huge value and comes with technicalities that require the moderators to have specific knowledge or where the option for arbitration is stated in the contract.
