Real Estate Development Joint Venture Term Sheet

by Practical Law Real Estate

A Standard Document providing a form term sheet for a real estate development joint venture (JV), structured as a limited liability company (LLC), between a minority operating member and a majority investor member. This term sheet is designed for a JV intending to develop commercial real property. This Standard Document establishes the framework for the material terms of the JV, covering essential provisions such as initial and additional capital contributions, default remedies, and the distribution waterfall, which includes a promote for the operating member. It also details the management structure, defining the operating member's responsibilities and the investor member's approval rights over major decisions. Key negotiated points like cost overrun obligations, member transfer restrictions, dispute resolution, and required loan guaranties are also addressed, setting a foundation for definitive agreements. While term sheets are generally governed by state law, this jurisdictionally neutral template is useful and relevant in every state. This Standard Document has integrated drafting notes with important explanations and drafting and negotiating tips.