Joint ventures (JVs) between landowners and real estate developers have become a popular model for property development in Nigeria. When structured well, JVs offer a win-win: landowners unlock value from their land, and developers avoid the high upfront cost of land acquisition.
Unfortunately, too many JV arrangements fail, often because of legal weaknesses in their structure.
At our firm, we’ve advised both landowners and developers on JV deals, and one thing is clear: the legal framework of the partnership often determines whether the project succeeds or ends in dispute.
Common Reasons JV Projects Fail
Several patterns emerge when JV projects break down:
- Unclear Contribution Terms:
What exactly is each party bringing to the table? Land? Funds? Approvals? Technical expertise? When these aren’t clearly defined, disagreements follow. - Poorly Defined Project Timelines:
Without clear milestones and delivery deadlines, projects drag on indefinitely, frustrating both parties. - Ambiguous Unit/Revenue Sharing Arrangements:
How will the finished units, rental income, or other proceeds be divided? Will the developer recoup investment through rents before passing ownership or profits to the landowner? What are the timelines and conditions governing these arrangements? Clear, detailed terms are essential to prevent misunderstandings and ensure both parties’ expectations are aligned. - No Clear Dispute Resolution Mechanism:
When disagreements arise (and they often do), the absence of a pre-agreed dispute resolution process leads to project stalemate, causing costly delays. Without a clear path to resolve conflicts, parties may end up in prolonged and expensive litigation that stalls progress and drains resources. - Inadequate Exit Clauses:
What happens if the developer can’t complete the project? Or if the landowner defaults on their obligations (e.g., providing clear title)? Many JVs overlook these questions.
Key Legal Protections for Both Parties
To prevent disputes and ensure timely project delivery, the following are general provisions we recommend including in every Landowner–Developer JV Agreement. However, it is important to note that the land’s history, key considerations, and specific location will often give rise to additional issues that require tailored clauses and protections.
- Detailed Scope of Contributions:
A clear statement of what each party is providing (land, financing, approvals, marketing, etc.). - Defined Milestones and Timelines:
Time-bound stages for design, approvals, construction, marketing, and unit allocation. - Transparent Sharing Formula:
Whether the landowner receives completed units, a revenue share, or a hybrid model, this must be clearly stated, including what happens if market conditions change. - Title Verification and Warranties:
Developers need legal assurances that the land is free from encumbrances. Landowners need clarity on what rights they retain until completion. - Exit and Default Clauses:
Clear conditions under which either party can exit the agreement, and the financial/legal consequences of doing so. - Dispute Resolution Framework:
Agreed mechanisms for resolving disputes: Depending on the required timeline and amounts involved, alternative dispute resolution methods should be considered, rather than immediate litigation.
In a recent engagement, we helped a developer restructure an ongoing JV with a landowning family where there had been multiple verbal amendments, side agreements, and misunderstandings over unit allocation. By formalizing the revised terms, creating clear timelines, and embedding enforceable dispute resolution clauses, the project regained momentum and avoided potential litigation.
Why Early Legal Involvement Matters
The best time to engage legal counsel is before signing any MOU or pre-contract agreement. Involving lawyers at the final contract stage after terms have already been informally agreed, often limits your ability to negotiate necessary protections.
Our firm works with both developers and landowners to design JV agreements that are fair, enforceable, and tailored to the specific realities of the project.
In conclusion, a well-structured JV Agreement doesn’t just protect against risk; it also creates clarity and trust between parties, which is essential for any successful real estate project.
Whether you’re a landowner seeking development partners, or a developer engaging with multiple landowners across projects, getting the legal framework right is critical.
For more insights on how we help structure effective real estate joint ventures, contact our team on lawyers@syntaxlaw.com or visit our website to schedule an appointment.
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