COVID-19 UK: Real estate update - Key issues to consider for property development JVs
Market Insight26 March 202026 March 2020
UK & Europe
Inevitably in the current circumstances participants – sponsors, investors and development managers - in property development joint ventures are focused on critical operational matters which are moving exceptionally rapidly. In some cases – such as where a development project is under construction - decisions are being taken hourly in response to emergency situations. In others – such as where planning has yet to be obtained - the impact may be less immediate, but no less fundamental for the bus
In these circumstances, there are risks that decisions may be taken without due process – however, hindsight is 20-20 and actions taken in haste now could be looked at less generously in the future. This entails risks on all sides, particularly in worst case scenarios where parties may have no choice but to look at their strict contractual rights. It is also inevitable that in some cases, JV partners will have bona fide but fundamental differences of opinion as to the best way forward.
It is entirely possible for parties to manage these risks by ensuring compliance with the existing agreements. Where these are not workable in the circumstances, parties may take steps such as agreeing emergency decision making protocols and delegated authorities, and discussing in advance how they might handle a good faith strategic disagreement. Doing so will establish a sound commercial footing for current activity, preserve a good working relationship between the parties and minimise the risks of disputes further down the line.
This note therefore asks, in short form, a number of questions which are intended to prompt our clients to consider issues which are important but which may not currently be front of mind.
Issues relating to construction contracts, landlord and tenant issues or considerations relating to loan facilities are not covered in this note, please see the detailed briefing notes on these subjects by following the links below: