Anatomy of a JV Agreement

Purpose: Sets the project name, the parties, and defines every term used later. Boring but load-bearing — sloppy definitions cause downstream interpretation fights.

Where it fails: Definitions of 'Project Profit' and 'Capital Contribution' are where most disputes start.

Purpose: Lists exactly what each party contributes (land, cash, services), the agreed value, and when contributions are made.

Where it fails: Land contributed at an unsupported value gets re-priced by lenders or tax authorities.

Purpose: Specifies when additional capital can be requested, how much notice partners get, and what the consequences are for not funding.

Where it fails: Open-ended capital calls with no cap let a sponsor dilute the other partners at will.

Purpose: What happens if a partner misses a capital call or otherwise breaches the agreement. Common remedies: dilution, penalty interest, forced sale of interest.

Where it fails: Vague default remedies are unenforceable. Specific dilution formulas or buyouts are the safe path.

Purpose: Categorizes decisions into operating, major, and unanimous. Names who decides what, with what voting threshold.

Where it fails: Single-partner control of all decisions equals an LP that exists on paper only.

Purpose: The order and split of money flowing out of the JV. See profit waterfalls page for detail.

Where it fails: A 50/50 split with a one-line waterfall hides who actually gets paid.

Purpose: How a partner exits voluntarily before stabilization. The shotgun mechanism is the BC default for two-party deals.

Where it fails: No buy-sell = lawsuits when one partner wants out.

Purpose: Drag-along forces minority partners into a sale; tag-along lets minority partners join a majority partner's exit.

Where it fails: Capital partners want both. Sponsors usually only want drag.

Purpose: Mediation, arbitration, or BC Supreme Court? Where, what rules, what governing law?

Where it fails: Arbitration is faster and quieter; Court is slower but creates precedent. Pick deliberately.

Purpose: Specifies the GST/HST joint venture election, designated operator, and any income/capital characterization assumptions.

Where it fails: Missing the JV election triggers double-taxation on services between partners.

Purpose: Builder's risk, GL, professional liability, errors and omissions. Who carries what, what limits, who is named as additional insured.

Where it fails: Underinsurance is invisible until something goes wrong, then it kills the project.

Purpose: How the JV ends. Cleanup of remaining liabilities, holdback releases, distribution of any final reserves.

Where it fails: Wind-down clauses get skipped because everyone is tired by then. Make them explicit.