Should You Use a Real Estate Partnership Agreement Template?
A real estate partnership agreement can be quite beneficial if you know what to include in the legal document. Do you want to learn how to write a contract for a real estate partnership? We’ve got your back! DoNotPay can help you understand how real estate partnerships work and whether a generic real estate partnership agreement template is the best option for you.
What Is a Real Estate Partnership Agreement?
A real estate partnership agreement is a contract between two or more real estate entrepreneurs to operate professionally in the industry. It defines the terms and conditions of their collaboration to ensure there is no conflict of interest, provides legal protection, and prevents disputes if things do not go as planned.
The agreement formalizes the duties and responsibilities of both parties, division of profits and losses, and distribution of assets. Although verbal real estate partnership contracts are legally binding, it is best to have them in writing to ensure mutual legal responsibility.
Since both parties are obligated to share liabilities, the contractual agreement must be completely transparent. When drawing up the contract, all parties should consult lawyers individually to create a fair deal for all.
Why Do You Need a Real Estate Partner?
Real estate partnerships are common and advantageous because:
- All parties can pool their funds to increase the amount of capital. Even if they have fewer resources individually, together, they can reap the benefits of combined assets
- You can divide responsibilities, take on more projects, and expand your professional networks
- Partners have the flexibility to distribute profit and losses
- You get different perspectives on managing the business and closing potential deals
Although there are many advantages to a real estate partnership, you also need to consider that every person has a different way of operating, which may lead to misunderstandings and disputes. The best way to prevent these potential issues is a detailed and transparent agreement.
How To Select an Appropriate Partner?
The most important step to a real estate partnership is finding a suitable business partner. Before you decide, take your time to conduct extensive research because selecting an unreliable partner can be disastrous for your business. You should consider the following before choosing an associate:
- Make sure you trust a person completely before onboarding them
- Your partner should have the same level of investment. You’ll be setting yourself up for failure if you and your partner disagree on fundamental decisions and strategies
Is a Real Estate Partnership Contract Legally Binding?
The short answer is yes. Ideally, the contract should have a clause for remedies if there is a breach. If it does not have such provisions, one partner can take legal action against another or nullify the contract.
The consequences of agreement violation can range from paying compensatory damage to removing the guilty partner from the partnership.
Even if there is a breach of contract, you might have problems making investment decisions or business strategies without the consent of your partner.
How To Create a Real Estate Partnership Agreement
When creating a real estate partnership agreement, you should consult a lawyer to ensure a document is valid and all-encompassing. If hiring a lawyer is a major expense for you, you can also look for contract templates online.
A real estate partnership agreement typically contains the following elements:
- Names of all partners getting into the contract
- A detailed list of duties and responsibilities of each partner
- Capital and ownership interest
- Percentage of profit and losses allocated
- Expected time commitment
- Division of labor
- Procedure to follow in case the partnership ends due to conflict, bankruptcy, or death
- Dispute and conflict resolution
- Voting rights
- Signature of all parties
Partnership agreements can also include terms and conditions for adding new partners or existing ones.
In some cases, the agreement needs to be notarized by a notary public to ensure all parties are signing the contract of their own free will and not being coerced into the deal.
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