16th Apr 2015

Hotel development is a complicated project, and generally brings together a large number of investors who become partners in the endeavor. As a result, most hotel developments have a mixture of general partners who not only invest capital, but handle the day-to-day operation of the project from design through construction and then management, and limited partners who supply further capital but who have traded control over the development in exchange for protection from liability.

For the most part, this arrangement works as long as the limited partners have faith in the general partners’ ability to successfully manage the project. When that faith is shaken, whether due to problems with the development (cost overruns, missed schedules dates, run-ins with inspectors or local government agencies) or due to personal interactions between the two, the dispute can be extremely destructive.

Hotel Development Dispute Resolution

Emotions tend to run high in these situations. Limited partners are frustrated because they have little control over how their investment is managed. General partners often resent the intrusion of Limited Partners into their business.

Litigation can stop a project in its tracks, especially if things escalate and motions are filed. A superior approach is to pursue alternative dispute resolution through mediation or arbitration, and the potential for success when using such a process is greatly increased when a hotel and real estate expert is called upon.

In the dispute resolution process, the mediator or arbitrator will hear arguments and data from each side, and then will consult with the expert for the benefit of their hotel and real estate experience. The expert should be mutually agreed-upon with no connection to the project. The expert’s opinions can be very effective in crafting a compromise both sets of partners are happy with. Having the expert’s perspective can allow both parties to find a mutually-acceptable way out of the dispute before it ruins the partnership, and can allow the hotel development project to get back on track.

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