What is Real Estate Partnership Agreement Drafting?
A real estate partnership agreement is a legal contract filled with information to guide the relationship between two or more investors in a property. It outlines terms such as their monetary contributions, profit sharing, and more.
If you need to draft a real estate partnership agreement, there are some important things to bear in mind.
Read the rest of this article for key terms to include in the contract, how to draft it professionally, and why you should consider hiring a qualified lawyer for help with the contract drafting process.
What Core Information Should Be in a Real Estate Partnership Agreement?
A real estate partnership agreement should contain the following key terms:
- Contributions. The parties’ monetary or other contributions must be clearly stipulated.
- Ownership. Explain the equity stakes determined by funding or property valuations.
- Profit sharing. Include how profits will be shared between parties.
- Capital calls. If there are future funding requirements, the agreement should state what rules or processes to follow.
- Operations. Explain how daily tasks will be handled, and by whom.
- Decisions. The agreement must include how major decisions are made, such as if unanimous votes are required.
How Do You Draft a Real Estate Partnership Agreement?
When drafting a real estate partnership agreement, elaborate on its key terms. Here are some things to bear in mind so that you provide a comprehensive contract.
Explain Profit Distribution
This is one of the most important parts of the contract. Specify how profits are shared between parties and if this takes the form of an equal split or not. By defining it now, you can prevent disputes in future.
Detail Contributions
Monetary, labor, and other contributions that partners make should be clearly defined in the agreement. This clarifies what parties are responsible for so that there’s no confusion.
Address How Losses are Handled
Besides profit distribution, your agreement should also specify how losses will be handled. Distinguish between different types of losses that could occur, such as cash-flow shortfalls, capital losses, and more, which can have different consequences.
Outline Decision Making
You want to be clear about how decisions, both large and small, will be made. For example, consider what decisions require unanimous consent.
Discuss Transfers
It could happen that a partner in the agreement wants to transfer their share. You want to address what will happen, such as if buy-sell formulas will apply.
Select the Correct Legal Structure
You’ll need to set up a legal structure for your real estate partnership. This could be a Limited Liability Company (LLC) or Limited Partnership (LP), for example, depending on factors such as the investment type. A lawyer can assist you with selecting the best one for your specific arrangement and compiling the required documents.
Should You Hire a Lawyer for Real Estate Partnership Agreement Drafting?
Although you don’t always need to hire a lawyer to draft your real estate partnership agreement, it’s worth considering. A lawyer will outline all parties’ roles and rights, while protecting you against disputes.
Here’s a rundown of some activities a lawyer will complete during the agreement drafting process:
- Define the parties’ responsibilities. A lawyer will outline what parties need to provide, such as specific contributions, and how they will make decisions.
- Structure financial arrangements. A lawyer will establish how capital contributions, losses, profits, and distributions are handled.
- Evaluate property ownership. They’ll explain how the property will be acquired and financed, providing clarity about the agreement’s purpose and processes involved.
- Plan for disputes. To protect you against financial or legal disputes, a lawyer will establish a dispute-resolution method, such as arbitration or mediation.
- Address liability. A lawyer will consider liability caps and responsibility to protect parties.
- Ensure legal compliance. A lawyer is skilled at customizing the agreement to your specific situation, aligning it with applicable property, tax, and other requirements.
- Review your agreement. If you’ve already drafted your real estate partnership agreement, you should hire a lawyer to provide an in-depth review of it to give you peace of mind that it’s clear and legally valid.
Where to Find and Hire a Lawyer to Draft Your Real Estate Partnership Agreement
If you’ve decided to work with a lawyer to draft your real estate partnership agreement, you don’t have to call traditional law firms in your area. You can use an online legal platform that gives you access to many lawyers who can assist you with your contract drafting needs.
ContractsCounsel is one of the biggest online legal marketplaces that connects you to a curated network of lawyers who have been vetted on the platform. To request that a lawyer on the platform drafts your real estate partnership agreement, here are the easy steps to follow from your device:
- Go to the ContractsCounsel marketplace.
- Select ‘One-time project’ and ‘Create or update contract.’ If you’d prefer to request a review of your agreement, you’ll select ‘Contract review.’
- Post your project for free. You can include details of your project to help you match with suitable lawyers.
- Wait for bids. You’ll receive bids from lawyers directly on the platform who are ready to help you.
- Read the lawyer data. You can go through extensive lawyer data provided by the platform, such as the lawyers’ location, expertise, years of experience, credentials, and client ratings for projects they’ve completed on the platform.
- Select a lawyer who meets your requirements and hire them to draft your real estate partnership agreement for a flat fee.
