Property joint ventures span a range of potential structures. They can be carried out through varied legal vehicles such as contractual joint ventures, limited companies with shareholder’s agreement, and, limited liability partnerships with member’s agreements. The summary below provides background to the most common types of joint venture structures. There are multiple variations which we can help you develop to cater for your specific requirements.  Joint ventures are a great way to (a) apportion risk, (b) combine parties who possess expertise and experience with those who hold land and/or are cash rich. The result is often a potent, affordable entity able to maximise any profit potential.



This summary will hopefully demonstrate on the one hand the plethora of possibilities and on the other the need to make sure that you set up the best structure to suit your particular circumstances from the outset.

This summary does not constitute legal or tax advice, and you should always make sure that appropriate advice is taken at as early a stage as possible, to avoid wasted time and money.

Limited Liability Company

  • A company is a separate legal person, and a limited liability company is a separate legal person whose owners’ liabilities are limited to the par value of their shares.  The principal disadvantage of the limited liability company is that it is not tax transparent and that therefore there is a likelihood of two layers of taxation: one at company level and one at shareholder level.  As a separate legal person a company is assessed to corporation tax on its income and on capital gains from a property held as an investment.  A company can however be a suitable vehicle for a single project with the objective of sale and realisation of profit in the short to medium term.
  • By way of example, a property owner could set up a separate limited liability company (possibly a subsidiary of its holding company) to hold a particular property.  The owner could then “sell” the property by selling the shares in the company to the buyer. This will give rise to a reduced charge to SDLT (Stamp Duty), at 0.5% instead of 4%.  Bear in mind, however, that some buyers of property may not want to buy shares, and that the procedure for share sale is generally more complex and expensive for buyers and their lenders. If the property is the client’s principal home this will lead to a loss of capital gains tax relief otherwise available to owner occupiers.  There are also issues with capital gains within the company.   A buyer would want to be compensated for the gain carried over in the company if they purchased the shares.
  • If the idea is to develop the property with a partner/investor before selling, the big upside for a limited liability company is that it is hard to pierce the corporate veil. However, director’s responsibilities and exposure within this structure have increased quite significantly under the latest Companies Act.   Breach of obligations as a director carries the potential for personal liability/exposure.
  • The limited liability company route would necessitate a Shareholders Agreement to deal with issues such as exit routes, deadlock provisions, default, transfer of shares, control, funding and so on. If investors have a 50%:50% shareholding, then there is the potential for deadlock.  There are various ways to resolve deadlock (subject always to statutory and case law protection provisions for minority shareholders).
  • Normally, ordinary shares will be issued but those shares could be divided into different classes with different rights attaching to each class of shares.  Also, preferential shares could be issued to investors, conferring a right to a priority payment ahead of the holders of ordinary shares on the winding up of the company.
  • As accounts need to be filed at Companies House, there is an element of public scrutiny involved.   This can be problematic for some investors.   However, for small companies abridged accounts can be filed.  An advantage is that most clients have experience with limited companies and so, to an extent, will be familiar with the formalities.


This is a tax transparent structure in that each partner is taxed on its own share of the profits.   It would be regulated via a partnership agreement.   Otherwise, it is primarily governed under the Partnership Act 1890.   The main disadvantage would be that the partners are jointly liable for all of the partnership debts and such liability is unlimited.  For that reason we do not usually recommend using a partnership structure for property JVs.

Limited Partnerships

These are partnerships under the Limited Partnerships Act 1907.   This is the same as a partnership save that some of the partners can elect not to have an active role in the operation of the limited partnership and in return receive limited liability.   One or more of the partners must take over liability for all of the partnership debts.   Limited partnerships can be appropriate where there are large numbers of passive investors as participants: e.g. venture capital funds. They are, however, rarely utilised, not least because of the risk of creating liability inadvertently for the partners who thought they had limited liability.   We generally do not recommend this structure for property JVs.

Limited Liability Partnerships (LLP)

  • LLPs were introduced in April 2001 by the Limited Liability Partnerships Act 2000.   An LLP is a corporate body and a separate legal entity and is registered at Companies House.   However, like a partnership, the relationship between the LLP members (the formal name given to partners) is governed by private (members) agreements and by statute.
  • LLPs are tax transparent. The individual members are treated as carrying on business in partnership and are assessed to tax on their share of an LLPs’ income or gains as if they were members of a general partnership.  As long as you are carrying on business with a view to profit, there should not be a problem.   There are however some limited exceptions to the transparency for the purposes of capital gains rollover and holdover relief and you should discuss this with your accountant.
  • The standard regulations set out certain default provisions but the members (you need at least two) are free to agree their own arrangements for the management and control of the LLP.   Major disadvantages are the lack of transferable shareholding (unlike a limited liability company) and the fact that each member is an agent of the LLP.
  • You do not need to specify the amount of capital in an LLP and there is no bar on members’ involvement in management.  It is possible for your investor to become an ordinary member rather than a designated member. They will then have no, or only very limited control of major management decisions.   That would clearly be preferable!
  • The main disadvantage is that there are some legal loopholes which could potentially expose members to liability for wrongful acts of the members in the course of the LLPs business.   Care must be taken that members do not hold themselves out to third parties in such a way as to attract personal (and unlimited) liability.  Because LLPs are relatively new, there is very little case law on this.

Trusts of Land

  • Here up to four trustees (individuals or companies) can agree to hold the property on trust.   The trustees hold on behalf of the beneficiaries.   There would normally be a declaration of trust which would state the interests held by the beneficiaries, the rules governing the holding and selling of the property and so on.
  • Although trust arrangements can be very complex, there are often tax advantages.  Where a trust of land for the co-venturers is held under a bare trust, each beneficiary has an absolute interest in his share in the trust property and is treated separately for tax.
  • Disadvantages include the need to avoid the inadvertent creation of a collective investment scheme (your accountant will advise as there are all kinds of complications and pitfalls), the fact that the Court will retain powers to set aside provisions of the trust deed and that third parties will not necessarily be on notice of the trust’s existence.
  • This type of structure can be used where parties may own neighbouring properties that form one site.   They could agree to hold that property on trust and then transfer it to a nominee company which then carries out the development.

Geared Leases or Equity Sharing Leases

These can work where, for example, a landowner grants a long lease to a developer off the back of an investment proposition which yields an income.   This is a way of sharing the income or profit.   An underlease would then be granted at a rack rent to generate the income.

Contractual Arrangement

  • There are various forms of contractual arrangements by which individual entities join together to co-operate on a project, associating with each other as independent contractors.  There are many variations on this theme.
  • For example, if you are entering into an arrangement with the landowner you could purchase the property and on completion of the development pay a further sum of money, possibly by way of an overage arrangement which reflects the uplift in value or profit, once received.  The clear benefit here is that the initial price paid is reduced to reflect the risk.  The reward is by way of the profit share that the landowner will hopefully take from the longer term investment in your venture.
  • Alternatively, the landowner could retain ownership of the land during the development phase (and beyond) but enter into a collaboration type agreement whereby the developer carries out the development and receives a share of profit (and/or income) on completion of the sale.   A licence or other property interest or a restriction on title or a charge on the title to protect the developer’s interest is possible.   Here, there would need to be a detailed agreement setting out how expenditure and receipts are to be treated and who is liable.   Depending on the structuring of this model, it is likely that different tax consequences will arise.
  • A variation of the structure outlined in sub-clause 3 above could suit some circumstances.   A property is purchased in a developer’s personal name, or jointly with an investor, subject to a contractual joint venture arrangement whereby the developer takes control of the development of the property and consults with the investor on the marketing and sale of the property.   In addition, the investor could obtain some security by way of a loan agreement and/or second charge (see below).   This would be a simpler and easier structure to put in place and so depending on tax advice this may well be preferred.
  • It must be clear from the contract documents that the individual participants do not have a relationship of partners which would give rise to joint and several liability.  The agreement can be drafted in such a way that it is clear the parties do not act as partners and cannot bind the others.   Additionally, the roles of the individual parties will need to be set out with separate powers, duties and obligations. A simple form of contractual association where you are coming together with an investor or landowner for a particular venture is often quicker, appropriate and cost effective.   As a long term vehicle, it may not be so useful.

Forward Funding Arrangement

A typical forward funding arrangement will arise where an owner has pre-sold a particular property venture or pre-let it.   The investor will therefore know that he will obtain a particular and fixed return.   The disadvantage is that the end price is fixed and interest rates or development costs may fluctuate.   This kind of structure is more commonly used with an institution that provides the funding and ends up with the asset pre-let. The developer may take a development lease during the development period.

Loan Agreement linked to a Second Charge

  • Under this structure, the purchaser acquires through individual names or a contractual arrangement or an LLP or a limited company.  The primary lender provides the loan to acquire the property and some of the development finance, up to a certain percentage, secured by a first charge on the property.  The investor would provide the mezzanine finance being the top slice of the equity needed to fund the purchase, secured by a second charge.   That second charge would have to be fully postponed or deferred in favour of the primary secured lender.
  • The advantage for the investor is that they would be secured against the property and obtain priority against all parties (including the purchaser) save for the primary lender.   This would involve less risk for the investor than a simple share in the equity (for example, shares in the case of a limited liability company structure).
  • The disadvantage is that some banks are reluctant to agree to second charges.  They can be persuaded, however, particularly if the amount secured by their first charge (protected by a deed of priorities or other inter-creditor agreement) leaves enough headroom to give the primary lender comfort.
  • The loan agreement will impose certain development obligations on the developer.  The developer may have to provide a personal guarantee or other assurance to the investor that, for example, the development will be completed within a certain timescale (with an extension of time granted should events occur which are outside of the developer’s control and would normally give an extension of time under a standard type build contract) and a maximum cap on the development costs leaving the developer for any cost overruns.   There will be the usual events of default in the loan agreement/second charge which would give the investor the ability to enforce its charge by way of a sale of the property, subject always to the priority of the primary lender.
  • This extra protection for an investor is generally very attractive to them. It could, however, leave the developer’s investment (time and/or money and/or guarantees) more exposed.

Off-shore Companies and other tax structures to benefit non-resident and/or non-domiciled investors

If the company is controlled and owned outside of the UK there are often major tax benefits, particularly capital gains tax exemptions.  These tend to suit non-resident and/or non-domiciled clients.  Some primary lenders and others will be reluctant to deal with off-shore company structures as they are harder to enforce against.  They are also more costly and difficult to administer and of course are governed by the laws of the particular jurisdiction.  However, if there is a strong tax incentive, it may make commercial sense to set up either a particular venture or a set of property ventures through off-shore entities. One has to assess the tax benefits against the need to develop a UK presence, UK brand and UK reputation/track record.  Primarily for tax reasons, this structure suits property investments as opposed to property developments.