The assignment clause in my first JV agreement reads backwards

I've got a two page JV agreement from a wholesaler who's been doing this eleven years in my market. Deal is a duplex, both sides vacant, seller inherited it and lives four states away. He has it at 88k, buyer pool says 112k to 118k for a landlord who'll do the work in stages.

My role is small and I know it. I found the seller through a driving list I built, made the call, and handed it over because I have no buyers and no idea how to close. He's offered 50 percent of net, which everyone tells me is the standard trade for a first deal.

What's stopping me is section 4. It says the contract with the seller will be assigned to his entity on execution of the JV, and that thereafter he has sole discretion over price, terms, extensions, and cancellation. Sole discretion on cancellation. So if he decides at day 12 that 88 is too high and wants to renegotiate the seller to 79, I have no say, and as far as I can tell he could also just cancel and come back to that seller later on his own, except section 6 has a non-circumvent that runs 12 months.

So the 12 month non-circumvent is the only thing protecting me on a deal I sourced, and I'd be relying on my ability to prove a violation, which I assume is expensive.

He's not being shady as far as I can tell, this is probably just his standard paper. I'm trying to figure out whether asking to change section 4 marks me as difficult on deal one, or whether that's exactly the point at which you find out who you're working with. Closing is targeted for the 19th.

Answer

1aliyah_bAU2APRO6

Ask for one change, not five. The one I'd ask for is a floor: he can renegotiate the seller down, and if he does the JV split applies to whatever the actual net is, but he can't cancel the seller contract without your written consent unless the buyer side fails inspection. That's a narrow ask and any operator who's done this eleven years will recognize it as reasonable.

The non-circumvent doing all the work is normal in these, and yes, enforcing one costs more than a 12k fee is worth. That's the real answer on why it protects you. It protects you because he doesn't want the reputation, not because you'd sue.

On 50 percent, I'd stop treating it as the price of the deal and start treating it as the price of watching him work. Ask to be on the call with the seller, on the title company email chain, and at the closing table. If he says no to all three, the 50 percent is buying you a check and nothing else, and you can source your next one and JV with somebody who'll teach. Have an attorney in your state look at the whole document before the 19th, that's a two hundred dollar problem, not a two thousand dollar one.

The assignment clause in my first JV agreement reads backwards

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