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HOW TO HANDLE REAL ESTATE JOINT VENTURE ARRANGEMENTS.

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You would recall that I had mentioned in my article on ‘Dealing with Land Bank issues in Lagos’ that the best solution to getting a robust/healthy land bank in Lagos Nigeria or any other geographical location for that matter is through Joint Venture arrangements. However, it has come to my knowledge that most people (developers, agents as well as landowners) don’t know how to go about this.

So, below are step by step tips on this subject matter:

1.) Send your letter of intent: Once you have identified a suitable piece of land for your desired project, you must send a letter of intent to the owner, expressing your interest in the land and requesting for documents of the property for your search purposes.

2.) Carry out a thorough search: Once you have copies of the land documents, it is required that you carry out your due diligence on same. Make sure the property indeed belongs to the owner and that there are no encumbrances on same.

3.) Do your assessment of the land: You need to have a professional perspective of what the land is really worth in terms of value. So, you need to carry out a proper valuation of same. This will come in handy in your commercial analysis since it represents the owner’s equity. Depending on the type of structure you intend to put on the land, you may also have to carry out a soil test (however, try and minimize your expenses on assessment before an agreement is signed). This will determine whether the land requires Piling works or not. This is also important for your commercial analysis.

 

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4.) Prepare your Commercial Analysis: This is your most important document and it entails such details as the value of the land, the estimated cost of the project (which is what the developer would be bringing to the table), other costs and how they’ll be shared and ultimately the sharing formula. Please note that this is just a guideline. Your commercial analysis must be very detailed and as much as possible don’t leave any expense unattended to.

5.) Meet with the Owner(s): There is no point meeting with the owner until you have a proposal for him on paper i.e. your commercial analysis. This is where you both look at the numbers and determine if both parties are willing to go forward with the transaction. Usually, this is a negotiation meeting. It is also a good opportunity for you to sell your project concept to the owner with pictorial/architectural presentation.

6.) Sign a Development Lease Agreement: Once you can scale through step five above, the deal is as good as done. At this point an agreement must be drawn for both parties to sign.

7.) Commence Development: Once there are no issues and the agreement has been duly executed, by all mean commence development and please stay within the time frame and other conditions provided in your agreement.

I’ll be glad to attend to your comments and questions.

Regards

@casioayo