Key points
- In a landowner joint venture, you contribute land, a developer contributes expertise and funding, and you share in the proceeds instead of taking a fixed price.
- A contractual JV usually leaves ownership with the landowner until homes are sold, while a corporate JV usually puts the land into a jointly owned company or partnership.
- Your share depends on the agreed land value, the order in which money is paid out and how costs and profit are defined.
- You take on more risk than with a sale, including planning, cost, sales and developer risk.
- Structure, tax and documents vary by case and by nation, so take independent legal and tax advice before you agree terms.
What is a landowner joint venture?
A landowner joint venture (JV) is an arrangement in which you put your land into a development and a developer provides the planning, design, funding and construction. Instead of receiving a fixed price, you share in the proceeds when the homes are sold or let. What you receive could be more or less than a straight sale.
JVs suit some landowners and not others. They can give you a bigger share of the value created by development, but you take on more risk and wait longer to be paid. The legal documents are also more complex than for a sale, an option agreement or a promotion agreement. This guide explains the main structures in general terms. It is not legal or tax advice.
What is the difference between a contractual and a corporate JV?
| Feature | Contractual JV | Corporate JV |
|---|---|---|
| How it works | A development agreement between you and the developer, often with a building licence that lets the developer build on your land | A separate vehicle, such as a limited company or limited liability partnership, owned by you and the developer |
| Who owns the land | Usually you, until each home or plot is sold to a buyer | Usually the JV vehicle, after you transfer the land into it |
| How you are paid | From sale proceeds, in an agreed order | Through your shares or membership, under a shareholders' or members' agreement |
| Main points to watch | Control over sales, security for your land value, what happens if the developer fails | Tax on transferring the land in, decision-making and deadlock, how either party can exit |
Some JVs use a general partnership. GOV.UK explains that partners in a general partnership are personally responsible for the business's debts, which is one reason limited companies and limited liability partnerships are often preferred for development. In Scotland, a partnership has its own legal personality, which can change how land is held, so Scottish legal advice is essential there.
How is my land treated as equity?
In most JVs your land is your contribution, in the same way that the developer's funding and expertise are its contribution. The parties agree a value for the land, usually supported by an independent valuation, and that value is credited to you.
The agreement then sets the order in which money is paid out as homes are sold. One approach is for the land value to be paid to the landowner first, or in stages as homes sell, followed by repayment of the developer's costs, with any remaining profit then split. Other structures repay the developer's costs first, or give one party a priority payment. Each order shifts risk between you and the developer. Our guide to how development land is valued explains how a land value is reached.
Lenders funding the build usually want security over the land. If you are asked to let a lender take a first charge, or to rank your land payment behind the lender, take advice first, because it puts your land value at risk if the scheme fails.
How is profit shared?
Profit is usually the income from selling the homes, less the agreed costs of planning, building, selling and financing them. The split is negotiated and normally reflects what each party brings and the risk each takes. Because the definition of costs decides what is left to share, it matters as much as the split itself. Points to agree in writing include:
- which costs count, including the developer's overheads, fees and interest
- how cost overruns are handled and who carries them
- who sets sale prices and approves discounts or incentives
- your right to see the accounts and to have them checked independently
- what happens if some homes are kept and let rather than sold
What are the risks for a landowner?
- Planning risk: permission may be refused, delayed or granted for fewer homes.
- Cost risk: build costs, finance costs and planning obligations can rise.
- Sales risk: house prices and the pace of sales can fall, delaying or reducing your payments.
- Developer risk: the developer may run into financial difficulty.
- Control: day-to-day decisions usually sit with the developer.
- Time: you are paid as the scheme progresses, which can take a long time on larger sites.
Agreements can reduce these risks with longstop dates, step-in rights, a guaranteed minimum land payment, regular reporting, parent company guarantees and clear deadlock and exit provisions. None of them removes risk entirely.
How might tax affect a joint venture?
Tax can make a large difference to what you keep, and it depends on the structure and your own circumstances. Questions an accountant will look at include:
- whether your share is treated as a capital gain or as trading income; HMRC has specific rules on profits from dealing in or developing UK land, which apply whatever the residence of the person or company
- whether transferring land into a JV company triggers Capital Gains Tax and a land transaction tax: Stamp Duty Land Tax in England and Northern Ireland, Land Transaction Tax in Wales, or Land and Buildings Transaction Tax in Scotland
- whether VAT applies to any part of the scheme
- how the arrangement affects inheritance tax planning and any reliefs on farmland or business property
Take independent tax advice before you agree heads of terms, not after. Our guide to tax when selling land covers the basics.
Do joint ventures work differently across the UK?
Company law applies across the UK, so a JV company is registered with Companies House wherever the land is. Land law, conveyancing and land taxes differ, though. In Scotland, land is transferred under Scots law and registered with Registers of Scotland. In Northern Ireland, titles are registered with Land & Property Services, and in England and Wales with HM Land Registry. Planning rules also differ between the four nations, which affects risk and timing. Use advisers who practise in the nation where your land is.
Is a joint venture right for my land?
A JV may suit you if you can wait to be paid, can accept that the final figure is uncertain, and want a share of the value created by development. A direct sale, an option or a promotion agreement may suit you better if you need certainty, want a clean break or have other plans for the money.
Land to Homes considers joint venture development where a site and a landowner's aims fit. We start with a free site appraisal, explain the routes open to you in writing, and expect you to take independent legal and tax advice before anything is agreed. You can begin with our free appraisal tool or read more on our page for landowners.
Frequently asked questions
Do I keep ownership of my land in a joint venture?
In a contractual JV, you usually keep ownership until each home or plot is sold, and the developer builds under a licence. In a corporate JV, you usually transfer the land into the JV company or partnership in exchange for your share, so the vehicle owns it. Each approach has different legal, tax and risk consequences, which your solicitor and accountant can explain for your circumstances.
Can I lose money in a joint venture?
Yes. If costs rise, sales fall or the scheme fails, what you receive could be less than a straight sale would have paid, and in some structures your land could be at risk if a lender has security over it. Protections such as a minimum land payment and step-in rights can reduce the risk but not remove it. Weigh the downside as carefully as the potential upside before you commit.
Who manages the development in a joint venture?
Usually the developer, which handles planning, design, construction and sales day to day. The landowner normally has approval rights over major decisions, such as the planning application, the build budget, sale prices or bringing in new funding. These rights, and how disagreements are resolved, should be set out clearly in the development agreement or the shareholders' or members' agreement.
Do I need my own solicitor and accountant for a joint venture?
Yes. A JV is more complex than a sale, and the developer's advisers act for the developer, not for you. You need a solicitor experienced in development agreements and an accountant or tax adviser who can model the tax position under different structures. In Scotland and Northern Ireland, make sure your advisers practise in that jurisdiction, because land law and procedure differ.
Sources
- Set up a business partnership (GOV.UK)
- Set up a limited company (GOV.UK)
- HMRC Business Income Manual BIM60520: profits from a trade of dealing in or developing UK land
- Tax when you sell property (GOV.UK)
- Stamp Duty Land Tax (GOV.UK)
- Land Transaction Tax: overview (gov.wales)
- Land and Buildings Transaction Tax (Revenue Scotland)
This guide is general information about how land and housing processes usually work. It is not legal, tax or financial advice. Rules differ between England, Wales, Scotland and Northern Ireland and change over time, so take advice from a solicitor, accountant or land agent on your own situation.