On homeowners right to buy a transparent contract
By Architect Gilbert C. Yu
Joint-Venture (JV) projects between landowners and developers are a boon lately, especially after the bank closed their lending window to plain land mortgages without a financial plan incorporated into it. Left and right we see the merging of forces — big businesses fuse their efforts and assets for this type of housing development, condominium tower and the like.
Most layman investor or homebuyer sees this as a good indication — of two big groups who have joined together to do a project that redounds to reliability and soundness.
But, what they don’t know is that it is not as simple as it may seem.
Primarily speaking joint ventures arise from the developers’ shortage of capital or refusal to infuse capital to purchase land — avoiding risk by pushing it to someone else. On the other hand, landowners welcome this offer to develop their property at a value much higher than what they can fetch from just selling the property.
Like a marriage of convenience
In many ways joint venture is more similar to a marriage for convenience.
It is a mutually beneficial partnership that doesn’t have the foundation of loyalty to last long, and is not really tied down to keep the vows like “for poorer or for richer till death do us part.” Yes there is nuptial bliss but the union isn’t strong enough to weather tough times together; that going on separate ways or through divorce litigation is a quicker and better solution than working things out during bad times.
When a marriage goes bad and marital disputes arise, the children are the victims of these unfortunate circumstances, similarly if a J.V. partnership ends up in litigation… the victim is the buyer — patronizer of the unhealthy union.
Know JV contract details
Aware of the risk, buyers of a joint-venture project should insist to know the details of the joint venture contract from the seller developer.
Be aware of the responsibility of each partner. As the landowner gives his land to be developed, the other partner does the work of marketing and handling the project. In the meantime it is only the developer collecting money from the buyers while the sales contract doesn’t require landowner to have direct responsibility to the homebuyers or any legal obligation whatsoever.
In some cases, the risks are higher when a government entity is the landowner partner. Changes in the administration often result to alteration or renegotiation sometimes with impossible demands that the developer cannot cope with. Then problems arise, the buyer who paid and buy in good faith are left in a quandary.
Take the case of a high-end development for a golf and country club in Northern Luzon under the auspices of a government authority. The developer experienced some form of success with its offer of high-end housing but allegedly defaulted on payment obligations to the government.
Only after the government entity issued a warning that it would retake the property did the developer pay up partially.
The danger of litigation always exists between the developer and the landowner at the expense of the buyers which have no knowledge of the details of the partnership.
In some cases, incomplete fulfillment of the developer’s obligation cause the landowners refusal to surrender the land title to be processed for the issuance of a condo title. And when this happens the buyer cannot do anything, leaving them hanging and their investment in thin air again.
Land title should be put in trust
For buyers who already took the risk of buying in to a JV project, insist that the JV contract be transparent for review by a lawyer to see if they’re properly protected even when there’s a quarrel between the JV partners.
Absolutely there should be no compromise. Since 3rd party landowner is involved, insist that the land title be put in trust. This will work to the buyers’ advantage because it means that the landowner recognizes your contract with the developer.
But if the said condition is not possible and the buyers still feel that they are treading with a shadow of a doubt… Once a contract is drawn, the buyer should assert their rights by requiring the landowner-partner to be a binding 3rd party signatory, for the simple reason that land is also included in the sales.