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Development Agreements at Effective Legal Solutions
Parties contemplating a joint venture development should understand their respective roles and responsibilities and ensure any agreement reached protects their interests, mitigates loss and reduces personal risk.
Whether you are a builder, developer or land owner, a building development agreement tailored to the unique circumstances of the proposed development and the parties’ respective interests should be prepared.
Building projects can range from small residential subdivisions to large mixed-use developments. The arrangements between the parties and their respective contributions to the project also vary.
A development agreement could typically involve a landowner retaining ownership of land while a developer is retained to carry out the entire project, including sales and marketing of the completed project. On completion, individual units are sold and transferred to purchasers and the developer accounts to the landowner for the agreed profit on each sale. Of course, there are numerous variations to these types of arrangements which are commercially driven but must be structured to balance the respective rights of each party, allocate risk appropriately, and deal with a number of matters including taxation and stamp duty issues.
A development agreement should set out a comprehensive scope of the project, how it will be staged, funded, managed and insured against risk. The parties’ respective financial contributions, how consultant and management fees are calculated, and profits distributed must also be considered and the agreement should include critical timelines for development approval, finance, construction stages, certification and completion.
As the project will typically run over several months, various contingencies should be included to deal with unforeseen yet common events typical of the construction industry such as inclement weather, material and labour cost increases and / or shortages, changes in regulations and variations to the scope of works. The agreement will typically include a sunset date and termination clauses if certain pre-conditions cannot be met, such as the development not being approved as proposed, unanticipated price increases and legislative changes.
Processes for settling disputes or approving variations to the scope of works should also be included and the occupation health and safety risks assessed in accordance with the relevant laws.
A joint venture project requires a relationship of good faith between the parties, choosing the right structure for the arrangement and having a well-drafted agreement to ensure consistency, certainty and to mitigate risk. Our building and construction team can discuss your requirements and provide advice and assistance in formulating an agreement tailored to the unique nature of the development and your specific needs.