Housing partnerships

At its core, a joint venture is a simple concept really. You split the possible risks, and rewards, of a development opportunity 50:50 with your development partner. But when does this sharing start?

A number of joint ventures are structured with one party providing the land, and another providing its construction ability and supply chain. This can lead to a difference of opinion from the very start.

Contractor partners often feel that the risk sharing should only begin once planning for the development has been obtained. Up until that point, costs incurred will likely benefit the land-owning party in one way or another – whether through planning designs which can be re-used, or perhaps resident engagement.

The land owner may feel that risk sharing should begin from the date contracts are exchanged. Planning, resident engagement, and vacant possession are all absolute requirements to start works. Without these, no development can take place and no profits can be made. Land owners may argue these are 'true' joint venture costs.

Some partnerships look to address this by dividing up responsibility for satisfying (and responsibility for the costs of) the various conditions. For example, land owners may look to retain control of the resident engagement piece, whilst developers may be better placed to navigate the planning system. Should the costs for the different areas of work not balance out, even taking account of the fact the land owner may have a residual benefit from the planning work undertaken, then there remains a discussion to be had. 

In an area like London where land can be at a premium, land owners have a better starting position in discussions. They can set some of the terms for the development opportunities they bring to the market. This may include an insistence that both parties are "in it together" from the start. 

There is no right answer to this question. Parties looking at entering into partnerships will do well to consider the issue from the start to avoid difficult conversations later on.     

James McCormack is a Senior Associate at Trowers & Hamlins.