Joint ventures between investors and developers

Joint ventures combine an investor's capital with a developer's expertise and land or pipeline. They can align interests well, but disputes typically arise where the documents leave key questions unanswered.

Choosing the vehicle

Most real estate joint ventures in Spain use a special purpose company, with a shareholders' agreement setting out the parties' rights alongside the articles of association. Contractual arrangements without a company are possible but offer less structure.

Key provisions

• Contributions: what each party provides (cash, land, services) and how it is valued.
• Funding calls: what happens if further capital is needed and a party does not contribute.
• Governance: reserved matters requiring investor approval, such as budgets, contractor appointments and sales.
• Developer fees and related-party transactions.
• Reporting and audit rights.
• Deadlock mechanisms and dispute resolution.
• Exit: transfer restrictions, tag-along, drag-along and buy-out rights.

Investor protection

Investors should consider security over the project, step-in rights if the developer defaults, and clear definitions of default events. The ability to obtain timely, verifiable information is often the most important practical protection.

Hypothetical scenario: the example below is invented for illustration. It does not describe any real property, project, company or person. An investor funds 80% of a residential project with a developer contributing land. Costs overrun and the developer cannot fund its share. Because the agreement includes dilution and step-in provisions, the investor can fund the shortfall and take additional control rather than face a stalled project.