Partnerships

How to structure a joint venture agreement for a property with an open permit

Structuring a joint venture for a property with an open permit requires clear definitions of responsibility and risk mitigation. The agreement must explicitly address who will handle the permit resolution, associated costs, and potential delays.

October 25, 2026 · 3 min read

Understand the implications of an open permit

An open permit means that work was started but not officially completed or inspected by the local municipality. This can range from a minor electrical repair to a full addition. The issue is that the city or county still considers the work incomplete, which can cause problems during resale or refinancing.

Before entering a JV, thoroughly investigate the open permit. Determine what work was done, why the permit wasn't closed, and what steps are needed to resolve it. This might involve additional inspections, remediation, or even tearing out and redoing work. This due diligence will inform your JV agreement.

Clearly define roles and responsibilities

In your JV agreement, explicitly assign who is responsible for closing the open permit. Will one partner be the point person for coordinating with the city and contractors? Or will it be a shared effort? Detail who will handle communication, scheduling, and physical completion of any required work.

For instance, one partner might be more experienced with dealing with local building departments and contractors. He or she could take the lead on permit resolution, while the other partner focuses on other aspects of the deal, like finding /how-to-find-cash-buyers-for-wholesale-deals.

Allocate costs and budget for contingencies

Resolving an open permit often involves unexpected costs. Your JV agreement must clearly outline how these expenses will be shared. Will it be a 50/50 split? Proportional to capital contribution? What happens if the costs exceed the initial estimates?

Create a detailed budget that includes permit fees, potential fines, inspection fees, and any necessary repair or re-work costs. Always include a contingency fund for unforeseen issues related to the permit. This financial transparency prevents disputes later on.

Address timelines and potential delays

Closing an open permit can be a bureaucratic process, leading to delays that affect your project timeline. The JV agreement should acknowledge these potential delays and outline how they will be managed. Will there be penalties for one partner if delays are his or her fault? How will holding costs be handled during extended periods?

Set realistic expectations for how long it will take to resolve the permit. Include provisions for extending deadlines if necessary, with clear communication protocols. This helps manage frustration and keeps the partnership aligned even when things take longer than anticipated.

Include clauses for risk mitigation and exit strategies

A property with an open permit carries increased risk. Your JV agreement should include clauses that address potential worst-case scenarios. What if the permit cannot be closed? What if the city demands extensive, costly remediation?

Outline an exit strategy if the permit issue becomes insurmountable. This might include selling the property as-is at a reduced price or dissolving the JV. Detail how losses would be shared in such a situation. This protects both partners from unlimited exposure. This is not legal advice, consult an attorney.

Questions people ask

Can we sell a property with an open permit?

You can, but it will significantly limit your buyer pool and likely reduce the sale price. Many traditional buyers and lenders will not touch a property with an open permit. It's almost always better to resolve it before selling.

Who is responsible for an open permit, the seller or the buyer?

Legally, the property owner is responsible for resolving open permits. If you buy a property with an open permit, that responsibility transfers to you. This is why thorough due diligence is crucial.

How do I find out if a property has an open permit?

You can usually check with your local city or county building department. Most have online portals where you can search for permits by property address. A title search may also reveal unclosed permits.