JV, Collaboration, Joint Venture…..the same thing!

After writing about the joint venture solution to repossession, I got asked what “joint venture” actually meant.

In the context of a home that is about to be repossessed and also needs some refurbishment to add to the equity the homeowner has, for me, a joint venture is a one off project where two parties agree to share the costs of refurbishing and then share in the profits from the sale.

In order for this to work, both parties contribute something to the project and both share in its success. In our case, the homeowner would contribute their home and we would contribute by taking care of the arrears, covering the monthly mortgage costs and project managing the refurbs. This would first of all have to be agreed with the lender and have their consent, as they would need to know exactly what is going on.

In more formal terms, a joint venture is when two or more parties, be they individuals or companies, come together to undertake a specific project or business activity. Each party contributes assets, can share in the revenues and expenses, and agrees on how to manage the venture. Unlike a permanent partnership, a joint venture is often for a single project or a set period, focusing on a specific goal, like developing a new product, entering new markets, or pooling resources for research and development.

In order for a joint venture to work, there would need to be a lot of trust and transparency and this is where first of all the homeowners situation would be analysed to see if there would be profit for both parties and when this is confirmed, a plan would be drafted that would include a timeline, projected costs and an estimated sale price.

The plan would then be put in front of two independent solicitors and made into an agreement before any work has begun. Then (and probably most important) the agreement would be shown to the lender for their blessing.

So, at its heart, a joint venture is a bit like teaming up with someone to make the best of what could have been a really bad situation that includes collaboration, sharing risks, and pooling resources to achieve a common goal that benefits all involved.