RESPRO (Real Estate Services Providers Council) is a nationwide coalition of affiliated real estate services providers that promotes delivery of convenient, innovative, and cost-effective affiliated real estate settlement services for consumers. The following is a list of the coalition’s joint venture do’s and don’ts.

DO:

• Ensure that the joint venture and its partners/stockholders provide consumers with controlled business disclosure forms at or prior to any referral.

• Feel free to offer consumers discounts for purchasing packages of multiple services so long as services are separately available and the discount is genuine.

• Proceed carefully when renting space from a joint venture partner (in particular, from one who might make referrals to the joint venture), and ensure that the rental payment is no more than what you have determined to be fair market value for such office space and services.

• Continue to permit other competing providers access to real estate broker offices, even offices that have a joint venture in them.

• Adequately capitalize the joint venture and staff it with its own employees.

• Ensure that the joint venture does meaningful and necessary settlement services if it is to be compensated for performing them.

• Ensure that the joint venture partners/stockholders each put up their own real capital, and that the value of such respective contributions is proportional to their respective interests in the venture.

• Ensure that dividends or partnership distribution are paid in proportion to the stockholders'/partners' ownership interests in the joint venture.

• Ensure that monies and other things of value provided to the joint venture for performance of settlement services bears a reasonable relationship to the value of those services (without considering the value of the referral).

DON'T:

• Forget to instruct employees on how and when to make disclosures and to maintain disclosure forms.

• Force consumers to accept referrals to the joint venture or affiliates by suggesting that you cannot or will not provide another settlement service unless they accept the referral.

• Pay rent to a person that is referring settlement services based on a percentage lease or on a valuation of office space that considers the value of the settlement provider's business or reflects a premium for the location in the settlement provider's office.

• Adopt policies that constitute lender lockout or deny access to providers competing with the joint venture.

• Form your joint venture in a manner that makes it appear like a shell (i.e., an entity that has far too few employees to perform the services to be provided and/or one that is undercapitalized).

• Subcontract out the meaningful functions involved in operating the joint venture to the venture partner, stockholders, or third parties.

• Give one joint venture partner (e.g., a real estate broker) an ownership interest in the venture for less than a fair value contribution.

• Pay dividends or partnership distributions in proportion to the amount of business referred or adjust ownership interest according to the amount of business referred.
  

• Let the joint venture receive monies for services it did not perform or for services that you or a third party performed for it.

Information obtained from:
RESPRO, Inc.
1090 Vermont Ave., N.W.
Suite 800
Washington, D.C. 20005