Better to use a Sub Fee Agreement or a Joint Venture Agreement?

Question

Hi Everyone!

Looking for some advice on the below problem...

I've been looking into the use of Master Fee Agreements for use during large wholesaling/investment transactions.

What are the best contracts to use where there are multiple parties to the transaction? i.e. 1. Seller. 2. Sellers Agent/Broker. 3. Me. 4. Wholesaler 5. Buyer's Rep. 6. Buyer etc. etc.

I would envisage using a Master Fee Agreement between the Buyer and the Seller's Agent/Broker to ensure payment of the commission/fee (3-6%). However, how do the rest of us "middlemen" (i.e. Me, Wholesaler and Buyer's Rep) ensure we're protected in the deal as the "glue" that brings everything together?

For the contracts, I see two possible options:

1. A one-use JV Agreement between Seller's Agent/Broker, Me, Wholesaler and Buyer's Rep which is specific to the deal, and sets out that any fees collected by the Sellers Agent/Broker upon closing of the deal must be disbursed equally (or whatever the split is) between all parties; OR

2. A Sub-Fee Agreement between Seller's Agent/Broker, Me, Wholesaler and Buyer's Rep which refers to the Master Fee Agreement, and says that any fee collected by the Seller's Agent/Broker under the Master Fee Agreement must be disbursed in accordance with the Sub-Fee Agreement (to the other parties).

If I were to choose Option 2, should I still be looking a putting in place a JV Agreement also anyway? If not, why not?

Note: I would assume I'd need non-disclosure/confidentiality clauses in the Sub-Fee and JV Agreements regardless of which one I chose to use, and in both if I decided to use both. Is this the only advantage to having both a JV and Sub-Fee Agreement in place?

Any assistance would be much appreciated!

Mike Sedlacek · Answer

I would suggest you get consul from an attorney with experience in Real Estate License Law. You could be investigated or an investigation into your relationship regarding your assigned contract to a buyer, would be brought on by the Licensed Broker. State Regulator Agencies will question your intent such as are you representing a buyer or seller in the negotiations? How are you separating yourself from representation on a negotiation. In other words are you considered exempt from the requirements of a licensee.

Real Estate Broker means ANY Person , WHO, FOR COMPENSATION OR VALUABLE CONSIDERATION , sells or offers for sale, buys or offers to buy, or negotiates the purchase or sale or exchange of real estate, including units or interest in condominiums, cooperative interest, time-shares program even though they may be deemed to be securities, or leases or offers to lease, or rents or offers to rent, any real estate or the improvements thereon FOR OTHERS. MUST BE LICENSED.

Michelle Green · Answer

Hi @Mike Sedlacek,

Thanks for your response. Just to make it clear, I wouldn't actually be representing either the buyer OR the seller, so I don't think I could really be considered to be "offering to buy" or "negotiating" in any capacity. I would merely be putting the end buyer in touch with the seller via a network of contacts.

Good advice to contact a legal representative, though. It's always a good idea to run these things past an attorney first.

Better to use a Sub Fee Agreement or a Joint Venture Agreement?

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