A New Approach to Joint Ventures

HandShake

Over the years I have worked on and drafted quite a number of Joint Venture Agreements (JVA).  Some people are comfortable drafting their own JVAs.  Some folks are more comfortable after taking my Deal-Ready Documents course.  However, for most folks, they want to get our help in finalising that JVA.  I would say the percentage is about one third DIY and two thirds where people are just more comfortable with a lawyer helping them out.

When someone wants some help with a JVA sometimes they say, “I’m okay with the agreement generally, but I need help with a few clauses”.  Or sometimes they say, “I’m attaching my template JVA, can you please review”?  My real estate partner Richard Bell and I used to help out with these requests, but we have decided that neither of these scenarios are completely satisfactory.  Why?

The reason is that when we are asked to comment on just a few paragraphs, often those paragraphs are intertwined with the rest of the JVA.  Changing one paragraph in isolation may adversely affect other paragraphs.

On the other hand, when anyone sends us a template JVA and asks for a quick review, really, there is no quick review.  We have to read the whole document, think about it, analyse it and then give advice and opinions.  That approach is sometimes a surprise.  The comments are, “it’s your template, you drafted it, why do you have to review it in detail, don’t you know what’s in it”?

The answer is that where we might have originally drafted a template, we have no way of knowing whether what comes to us is that same template.  Small changes make big differences.

Our conclusion was that we couldn’t review just a couple of individual clauses because of how those clauses might affect the whole agreement.  Essentially we have to review the whole agreement.  And, when we are asked to review or to sometimes create a custom JVA, it’s a brand-new job every time; we start from scratch; it takes a lot of hours.  No matter which way you cut it, in order to give proper legal advice we end up having to do a complete review/creation of a JVA.

Richard and I brainstormed the situation and decided the answer was for us to revisit the whole notion of JVAs.  To overcome the difficulties described above and to update JVAs that hadn’t changed for a few years, we needed a brand-new JVA.  A JVA that would take the best parts of existing JVAs, simplify some of that dense legalese and just generally create a better, more readable document.  Our theory was that if we created such a document, then we could way more easily and quickly apply it to any individual’s JV situation.  This would be our “in-house” JVA, not one that has been circulated round the world and subject to the editing of the Internet at large (sorry, we won’t be giving this one out, folks!!  As I mentioned earlier, then we’d have no way of knowing if what comes back is the original without doing a thorough review).  Instead of putting all our time into review and analysis of something someone sent us we can put time into productive discussions about any individuals JV circumstances and then way more quickly—and less expensively—get a JVA completed.

That was the theory. Then it was time to get started on the creation of a brand new JVA.  So, over the course of six months, Richard and I had numerous early morning breakfast meetings at Denny’s on 104ave across from MacEwan U here in Edmonton.  We’ve been there so many times we have a regular table!  We brought our giant files full of JVA precedents and, away from the hurly-burly of the office, looked at the various templates that we have accumulated over the years.  We must have examined at least ten different forms of JVA.  We examined individual topics like, “Additional Financial Contributions” or “Management” or “Settling Disputes” and compared how each template JVA dealt with or, in lots of cases, didn’t deal with all the important JVA issues.  We discussed and argued and drafted.

In the end we created a brand new JVA that is extremely detailed, with language focused on clarity and ease of understanding.  When we finally finished six months later, we were pretty proud of ourselves, big pats on the back, mutual admiration society!  Now to see if anybody liked our brand-new baby.

The next time someone called for a JV consultation, I said, “you know, we just don’t review individual clauses. And it is neither economically sound, nor a wise use of your legal dollar for us to create a brand new JVA. We can’t either take or review someone else’s JVA; it doesn’t matter where it comes from.  How we do it is have an in-depth consultation with you and then work your details into our brand new JVA.”

We got great reactions!  Now when we do JV consultations, we spend way more time on in-depth consultation and discussion and way less time on drafting.

In this process Richard and I have had one of those “basic” lessons reinforced for us. Interestingly, we kind of thought that our brand-new JVA would fit more people’s circumstances without amending.  Wrong!  The lesson we learned again is what we have preached over the years. And that lesson is, everyone’s circumstances are different.  Everyone has their own take and spin on how they want their JV to run.  Templates are great but when you get right down to it and have a full discussion and consultation, there are usually substantial changes to be made.  And that’s fantastic! We know the JVA upside down and backwards so we can make changes and create a custom JV tailored to your situation. You get the JVA you want and need and we get a great sense of pride and accomplishment in helping you achieve. A definite win-win!

 

That’s it folks, the JV process at RMLO Law LLP.  For questions or to book a consultation, please get in touch!

Contact Barry McGuire now. Alberta real estate needs an Alberta lawyer.

“3D Realty Handshake” image courtesy of Scott Maxwell. Used under Creative Commons Attribution-Sharealike 2.0.