A joint venture, sometimes referred to as a joint adventure, is an undertaking founded on contract by two or more persons jointly to carry out a single business enterprise for profit. The undertaking or enterprise usually relates to a single transaction even though it may comprehend a business to be continued for a period of years. The relationship among joint venturers or joint adventurers does not create a partnership per se, although courts have shown the tendency to ascribe partnership law to joint ventures. Because both joint ventures and partnerships are associations with very similar characteristics, it can be extremely difficult to distinguish between them.
Jurisdictional Considerations (Joint Venture)
Depending on the particular jurisdiction, a joint venture may be considered:
- As a statutory legal entity.
- As a partnership.
- As a nonlegal entity.
- As a tenancy in common.
Obviously, the formulation of rules or requirements on the formation, duration, and termination of a joint venture must be based on the concept ascribed to the joint venture within any specific jurisdiction.
Title Insurance Considerations Regarding Joint Venture
Whenever a joint venture is found in a chain of title, or the joint venture is to become the subject of title insurance, it is necessary to examine state statutes and case law in order to determine the legal status and capacity of the joint venture to acquire, hold, encumber, and convey real property.
In this respect, the most important points to be determined are the following:
- Whether the joint venture is a statutory legal entity.
- Whether, in the event of not being recognized as a legal entity, the joint
venture may instead qualify as a partnership under the provisions of the Uniform
- Whether when qualifying either as a legal entity or as a partnership, title
to real property can be held in the name of the joint venture or in the names
of its partners.
- Whether the Company has been furnished with a duly executed copy of the
joint venture or contract.
- Whether it has been ascertained that the joint venture agreement remains
in full force and effect and that all the joint venturers remain either alive
or in good standing (if corporate).
- Whether all judgment liens, tax liens, pending suits, and other matters
of record affecting the joint venturers have been shown as proper exceptions
in the commitment or title policy.
- Whether in the event that the joint venture is neither recognized as a
legal entity nor qualifies as a partnership, title to real property is held
in the names of the allegedly joint venturers as tenants in common.
- Whether, in the event of a tenancy in common and not a joint venture, the spouses of the married individuals, if any, must join in the execution of any real estate transaction.
Application Of the Uniform Partnership Act When Insuring A Joint Venture
If state law does not expressly designate a joint venture as a legal entity capable of holding title to real property, no title to be conveyed by or into a joint venture can be insured unless it is determined through the examination of the joint venture agreement or contract that the joint venture does qualify to be considered as a general partnership.
Liens Affecting The Members Of A Joint Venture
Unless the joint venture agreement is sufficient to qualify the association as a partnership under relevant state law and unless the deed vests title in the joint venture, judgments, tax liens, pending suits, and other matters affecting any of the joint ventures must be considered as affecting the joint venture property and must be shown as exceptions in title commitments and policies.
See also Partnerships.