Settlement/purchase options, page-138

The joint venture agreement will typically prohibit a participant from granting security over its joint venture interest without the consent of the other participant. Participants should ensure that the joint venture agreement caters for any existing or proposed securities that will be granted over their interests in the joint venture property. For example, if a participant has previously granted a security to a lender which extends to all property acquired in the future by that participant, that security would extend to the participating interest acquired by the participant when it joins the joint venture. A participant will typically require consent from the other participants to the creation of a security over its participating interest. A condition of that consent will usually be that the financier executes a deed of covenant, or priority deed, agreeing to be bound by the rights of pre-emption granted in favour of the other participants, on the exercise of its rights under its security.