The joint venture is the dominant structure for developing valuable land in Lagos, and the reason is arithmetic. Landowners in Ikoyi, Lekki and Victoria Island hold assets worth far more than they can afford to develop. Developers have construction capacity and access to capital but cannot buy prime land outright at current values. The joint venture lets each side contribute what it has. The structure works. What fails is the documentation, and it fails in predictable ways. THE BASIC SHAPE In the typical Lagos arrangement, the landowner contributes the land and the developer contributes the funding, construction management and delivery. On completion, the parties share the finished units on an agreed ratio, or share proceeds of sale, or take a combination. Sharing ratios vary with location, land value, the funding requirement and the negotiating positions of the parties. The ratio is what both sides argue about at the start. It is rarely what they end up in court over. What the parties actually argue about later **Delay.** The project runs past the intended completion date. The landowner has given up the use of the land and receives nothing while the developer's costs and the landowner's opportunity cost both climb. Without a longstop date and a consequence attached to it, the landowner has no lever. **Unit allocation.** The ratio was agreed in percentage terms without specifying which units. When the development completes, the parties discover they both expected the higher floors, the better orientation and the larger parking allocation. **Cost overrun.** Construction costs exceed projection. The developer seeks to renegotiate the ratio, or seeks a contribution from the landowner, or reduces specification. The agreement is silent on who carries the overrun. **Sale of units before completion.** The developer pre-sells units to fund construction, including units that fall within the landowner's share, or sells at prices that damage the value of the landowner's units. **Abandonment.** The developer stops. The land now carries a partly constructed structure, encumbrances, possible claims from off-plan buyers and possible claims from contractors. The landowner is left with an asset that is harder to deal with than the bare land was. **Title and encumbrance.** The developer seeks to use the land as security for construction finance. The landowner discovers their asset is mortgaged. ## Terms that determine who carries the loss **Title position and what the developer receives.** Decide and document whether the developer receives an interest in the land at the outset, an interest on completion, or no interest in the land at all with a contractual entitlement to units. This single decision drives most of the risk allocation. Landowners are generally better protected by retaining title and granting a licence to enter and build, with transfer occurring against delivery. **A longstop date with teeth.** A completion date that carries a consequence. Liquidated damages, an adjustment in the sharing ratio, or a right for the landowner to terminate and take the works in their current state. A date without a consequence is a hope. **Unit allocation specified in advance.** Not the percentage alone. The actual units, identified on the approved drawings, annexed to the agreement. Where phased allocation is necessary, set the selection mechanism, including who picks first. **Restriction on encumbrance.** Express prohibition on the developer mortgaging, charging or otherwise encumbering the land without written consent, with the ability to notify lenders of the restriction. **Cost overrun allocation.** State who bears it. If the developer bears it, say so unambiguously. If overruns beyond a threshold trigger renegotiation, define the threshold and the mechanism. **Control over pre-sales.** Restrict the developer's ability to market and sell units within the landowner's allocation, and consider a floor price to protect the value of the remaining units. **Performance security.** A bank guarantee, a performance bond, a parent company guarantee or a retained deposit. Sophisticated landowners require security. Most do not ask for any. **Step-in rights.** A defined right for the landowner to take over the works on defined default events, with the mechanism for doing so already documented. Without this, abandonment leaves the landowner litigating rather than completing. **Approvals and compliance.** Who obtains building approval and permits, who bears the cost, and what happens if approval is refused or granted on conditions that change the scheme. **Dispute resolution.** Arbitration or litigation, governing procedure, seat, and an expert determination route for technical disagreements about construction quality or valuation. Technical disputes resolved by experts are faster and cheaper than the same disputes resolved by a court. **Exit and deadlock.** What happens if the parties cannot agree. Buy-out mechanics, valuation methodology and a route out that does not require a judgment. ## Due diligence runs both ways **The developer should verify** the landowner's title to root, the absence of competing family or communal claims, the survey position, any government acquisition affecting the parcel, and the landowner's authority to enter into the arrangement, particularly where the land is held by a family, an estate or a company. **The landowner should verify** the developer's completed projects, corporate structure, financial capacity, track record on delivery timelines, and whether the contracting entity is a special purpose vehicle with no assets. A joint venture with an SPV means the landowner's practical remedy on default may be worth very little. Both sides tend to conduct one direction of this enquiry and skip the other. ## Tax and structuring The structure chosen affects the tax treatment, and the treatment differs depending on whether the arrangement is documented as a sale of an interest, a lease, a contractual joint venture or an incorporated joint venture. Capital gains tax, stamp duty, consent fees and value added tax may all be engaged depending on the form. This should be modelled before the structure is fixed rather than discovered afterwards. Rates and treatment change, so current professional advice should be taken on any live transaction. ## The pattern worth recognising Joint ventures fail in Lagos not because the commercial logic is wrong but because the parties document the upside and leave the downside to good faith. The sharing ratio gets six weeks of negotiation. The default provisions get a paragraph copied from a previous deal. The ratio determines what each party earns if everything goes to plan. The default provisions determine what each party loses if it does not. Given how often construction projects run late in Lagos, the second set of terms deserves at least as much attention as the first.