In an environment where housing supply continues to lag demand, and the government has again put new build housing at the top of the agenda, joint ventures (JVs) between Housing Associations and local authorities can be a powerful tool for delivering much-needed homes. These partnerships combine the expertise, resources, and strategic interests of both parties to unlock housing development opportunities that might not be achievable alone.
At Arlingclose, we’ve worked with both Housing Associations and local authorities to advise on the financing and structuring of these arrangements. The structure of the joint venture is critical — it determines how risks, rewards, and responsibilities are shared, and can significantly influence the success of the project.
Of course, there is no “best” when structuring a joint venture. However, each of the most popular options have their own advantages and disadvantages.
Limited Liability Partnerships (LLPs)
LLPs are a popular structure for joint ventures, particularly for housing projects, because it offers flexibility and tax efficiency. Each Partners’ liability is limited to their contribution, protecting their broader balance sheets. Also, LLPs are tax-transparent, meaning profits are taxed at the partner level rather than at the entity level, which can result in significant tax savings compared to a company for the LA partner and avoiding complicated gift aid schemes for the Housing Association.
A big advantage of an LLP is that the profit-sharing and governance structure can be tailored to the specific needs of the partners. Ease of profit extraction: Partners can distribute profits according to the terms of the LLP agreement without the constraints of company law.
However, LLP agreements can be complex and time-consuming to negotiate, especially when aligning the interests of HAs and LAs, and whilst liability is limited, partners may still need to provide guarantees for external financing, exposing them to risk.
Limited Companies
Setting up a joint venture as a limited company is another common option. A limited company is a separate legal entity, which can simplify financing arrangements and offer greater clarity on ownership and governance.
The company itself holds assets and liabilities, shielding the parent organisations from direct financial risk. Also, company law sets out clear rules for decision-making and dispute resolution. Lenders are generally more comfortable lending to a company structure, particularly for large-scale developments. Finally, profits can be retained within the company to support future development.
However, profits are subject to corporation tax, which could reduce the overall financial return and dividends must be distributed according to shareholding, which may not align with the underlying contributions or priorities of each partner.
Unincorporated Agreements
Unincorporated joint ventures are more informal arrangements, often based on a contractual agreement rather than a separate legal entity. There’s no need to create a new legal entity, reducing set-up time and costs.
Not incorporating means the terms can be negotiated to reflect the specific goals and contributions of each party and like an LLP, each partner is taxed directly on their share of profits, which can be more tax-efficient.
However, the LA and HA are directly liable for any debts or losses arising from the venture, and the lack of separate legal personality can make securing funding more difficult, as lenders prefer to lend to a distinct entity. Without the structure of company law or an LLP agreement, resolving conflicts can be more challenging.
Choosing the Right Structure
The best joint venture structure will depend on the specific objectives, risk appetite, and financial circumstances of the Housing Association and local authority involved. An LLP or limited company will usually be suitable for larger, more complex projects, where governance, liability, and access to funding are key considerations. For smaller, more flexible partnerships, an unincorporated or contractual agreement may be sufficient — though the increased risk exposure should not be overlooked.
At Arlingclose, we understand that navigating these structures can be challenging. Our experience in financing and structuring joint ventures means we can help you design a partnership that balances risk and reward while ensuring long-term success. If you’re considering a joint venture, get in touch at info@arlingclose.com — we’d be happy to talk you through the options.
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