OREANDA-NEWS. February 25, 2014. The current legal environment enables real estate investors to choose different forms of cooperation in developing real estate projects.

According to SORAINEN lawyers, who spoke at the annual conference of the Lithuanian Real Estate Development Association entitled “Private Real Estate Investment 2014: New Opportunities”, tax advantages are provided by joint activity (partnership) that has been undeservedly forgotten.

“Choosing the best form of cooperation in the field of real estate means assessing the key factors, ie the nature of the assets invested, the amount of investment and the size of the real estate project planned, the role of the investor and the risk to be assumed,” says attorney-at-law Giedre Frolenkiene, a senior associate with law firm SORAINEN.

The recovering real estate market encourages investors to look for new forms of project development including joint activity (partnership), which is not very popular.

“Partnership can be attractive in terms of tax. It enables project partners to operate without establishing a separate legal entity, while giving them the freedom to divide their roles and responsibilities,” says Saule Dagilyte, head of the Tax & Customs Team at SORAINEN Lithuania.

Nevertheless, both lawyers pointed out that some specific legal and tax aspects are associated with joint activity, and for this reason it should be chosen with caution only after assessing specific factual circumstances, risks and benefits.

So far special purpose vehicles (generally private limited companies) have been the most popular option for cooperation among real estate investors. That choice has been determined by the fact that liability of investors in this case is limited to the amount of their investment. In addition, a limited partnership has also been used in recent years as another form of cooperation characterised by more flexible regulation in terms of both payment of profit and admission of new partners.