condo assignment fees

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A Comprehensive Guide To Selling Your Assignment Condo

Trying to resell your preconstruction condo before closing? This blog is for you. Assignment sales are more complicated compared to their resale counterparts, but with some guidance, the process is easy. 

An assignment sale is a sale where the original buyers of a condo or home resell their contract to another buyer before closing. The most common type of assignment is a preconstruction condo assignment. Preconstruction condo assignments are prevalent because of the time lag between purchasing the home and the move-in date. While condo assignments might be the most popular type of assignment, any real estate contract is assignable. This blog is going to discuss condo assignments since they are the most prevalent, but *most* of the details apply to assigning a home or commercial preconstruction property as well.

In the GTA, our preconstruction market is booming. Toronto alone sees around 30,000 new home completions a year. Around 70% of preconstruction purchasers are investors. The remaining 30% of buyers are end-users who plan to use the property themselves. However, many investors, and end-users, might decide to sell the property before the final closing. Since there is no title to transfer, these buyers have to assign their contract to the next buyer. 

What is a preconstruction condo assignment sale?

An assignment is when the original buyers of a preconstruction condo decide to sell their contract with the builder to another buyer before the home is complete. This differs from a regular real estate transaction because we are not buying or selling a home, rather we are buying or selling an interest in a contract to purchase a home once it’s complete. Essentially, the buyers are taking over the seller’s place in the contract with the builder. The new buyer pays the seller their deposits back, as well as any profit. In trying times, there might not be profit, and in extreme cases, the sellers might walk away from their deposits.

Assignments are like the wild-west equivalent of real estate. The buyers are called assignees, the sellers are called assignors, and there is no fixed closing date! You heard that right, the buyer purchases the contract not knowing whether it will close in 4 weeks, 6 weeks, or 8 weeks. In many cases, the buyers only have a rough estimate for the final closing of the property as well.

Every builder’s agreement of purchase and sale is different, so every assignment sale is different. You need legal and accounting advice before, during, and after an assignment sale. A real estate agent’s job in the transaction is to find a buyer, negotiate the contract, and coordinate the sale from start to finish. Your real estate agent might also connect you with accountants, and lawyers who can help make the necessary legal and tax declarations.

The Builder’s Role In Assignments:

Sellers often misinterpret their rights to assign in their purchase agreements with their builder. In the showroom, builders are quick to say their contract is assignable if you want to flip your contract before closing. However, builders can control when, how, and to whom you sell your contract.

It’s important to follow the rules set out by your builder when marketing your assignment. Deviating from the builder’s purchase contract can result in you losing your deposits!

Since all preconstruction home assignments require the builder’s consent, it’s important to prepare the file for their consent at your earliest convenience. The builder will want the same information they collected from you when you first purchased the home: full names, current address, sin, IDs (front and back), telephone number, emails, mortgage pre-approval letter,  lawyer information… they will also want the buyer to replace all your cheques. Those could be cheques for future deposits, or cheques for interim occupancy fees. It’s important to advise the buyers to prepare all of this information before submitting the file to the builder, so there is limited delay assigning the property.

How do you sell an assignment condo?

The first step to selling your assignment is to review your original purchase agreement. The builder’s purchase agreement outlines restrictions and fees associated with assignments. An experienced realtor or lawyer can also review the contract with you. Next, email your builder’s customer service account and ask for permission to advertise the property for sale.

It’s important to thoroughly understand your preconstruction agreement, because some incentives offered to you might not be transferable to the buyer. Builders often offer incentives to direct buyers to stimulate sales. However, they sometimes make these incentives non-transferable. That could mean the free design dollars, or the capped development levies might not be available to the next buyer. It’s important not to advertise incentives that aren’t transferable.

The second step is to hire a Realtor to advise you on current market conditions. Your realtor will discuss marketing options as well as help you decide on a market price. There is a strong chance the builder will prohibit MLS listings of their properties. However, many builders will allow online marketing in places like Facebook, Instagram, WhatsApp, and brokerage websites.

While Realtor.ca is the best marketing platform out there, buyers looking for assignments know to look elsewhere. Don’t worry if you cannot market on realtor.ca. One of the advantages of Sotheby’s International Realty Canada is our vast marketing platform outside of Realtor.ca

Important Dates:

The first date you need to consider is the assignment closing date. This is the date the assignee officially takes over the contract from the assignor. On average, assignment closing happens within 3-6 weeks after an offer is accepted. This is when the assignee becomes the new owner of the property, and the assignee receives some of their deposit/profit back.

The second date to consider is the interim occupancy date. When buying preconstruction condos, there is usually a period between when the unit is ready for occupancy and before the building has registered with the city. Since no title exists yet, you cannot get a mortgage. Instead, during this time, you move in and pay the builder rent until final closing. Interim occupancy can last from months to years. During interim occupancy, buyers have the chance to view the unit which could help sell the home. Interim occupancy is when most assignment sales take place.

The third date you need to know is the final closing date. This is the date that the building registers with the city and the assignee pays the builder the balance of the purchase price, land transfer taxes, closing costs etc. Sometimes, assignees will negotiate to pay some of the assignors profit on final closing date, so they can roll it into the mortgage.

What Is Negotiable During An Assignment Sale:

Since the contract with the builder is already firm and binding, there can be no changes to that contract. The buyer is merely stepping into the seller’s shoes, in exchange for their deposits and profits. The assignment contract negotiates the purchase price and the deposit structure. The purchase price will indicate how much profit (or loss) the assignor receives in the transaction.

The payment schedule of an assignment is dependent on whether there is a profit or not. If the seller is making a profit or breaking even, then the buyers are expected to refund the full deposit paid-to-date by the sellers. In many cases, that is 20% of the original purchase price. If the seller is losing money on the assignment, then the buyers will bring a deposit for less than the deposits already paid to the seller. The deposit is due upon acceptance of the offer.

If there is profit, the assignee and assignor will negotiate when that profit is paid out. Remember when we mentioned the three important dates? the assignment closing, the interim occupancy date, and the final closing date? well, when it comes to negotiating when to pay the assignor their profit, we usually pick one of these dates to pay out the assignor’s profit.

The expected final closing is an important consideration for buyers when negotiating when to pay the assignor’s profit. The longer the final closing date, the more risk for the buyer. The reason? there is always a small risk the condo developer cancels the project. If a condo developer cancels the project, the buyers are returned their deposits paid-to-date. However, if a buyer has paid an assignor $100,000 in profit, that money is gone. So if there is a long closing, expect buyers to protect their final deposits by delaying it till interim occupancy, or final closing.

Conditions In Assignment Sales

After finding a buyer, the first hurdle to overcome is negotiating a fair deal. Once both parties are satisfied with the terms of the contract, we make the deal conditional on the lawyer’s review. This gives both the buyer and seller a chance to have the assignment contract, as well as the original purchase agreement, reviewed by a lawyer. Once both parties have spoken to their lawyers and are happy to continue, we put the deal to the developer to approve the new buyer. This condition usually lasts around 30 days. If the developer does not approve the new buyer within 30 days, the deal will become null and void, unless the buyer and seller both agree to extend that condition.

Once the developer accepts the buyer, the assignment will happen within a few days. Most contracts outline an assignment closing within 5 business days after the developer gives their consent. Some buyers will also include financing conditions in their assignment offer, so they have time to run the deal past their mortgage broker. However, most assignments are purchased with only lawyer review and developer consent conditions.

Here’s an example of selling an assignment for profit vs selling an assignment for a loss:

Below are four examples of the deposit/profit payment schedule for assignments.

Example 1 is a fantastic example of a preconstruction condo that appreciated $100,000. In this typical example, the assignee and assignor agreed to a deposit big enough to return all of the assignor’s deposits, as well as some extra profit to cover Realtor commissions. This deposit is usually transferred to the listing brokerage within 1 day of the offer being accepted and is released to the assignor on assignment closing. In this example, the assignor and assignee also agreed to pay the seller the rest of their profit at the final closing.

Example 2 shows the same conditions for the sale, except the assignee agreed to pay the assignor their full deposit and all their profit on the assignment closing date, instead of the final closing date.

Example 3 looks at an assignment where the assignor is taking a $100,000 loss. Instead of being paid their whole deposit on assignment closing, they are paid their deposit minus the difference between the purchase price and the sale price.

Example 4 is a rare case, where the market has turned significantly and the assignor is looking to transfer their assignment for $0. This means the assignor is walking away from all their deposits and will take no money to transfer their contract to the assignee.

What Does It Cost To Sell An Assignment condo:

The major fees when selling an assignment include the builder’s assignment fee, real estate commissions, and tax on the profit. Builder’s assignment fees usually range from $1500-$25,000 (in some extreme cases they go as high as $80,000). The assignor usually pays both the assignor and the assignee’s realtor commissions. The commission is something to negotiate with your agent. The total commission is usually 5% or less of the final sale price. There are likely taxes such as income tax, capital gains tax, or HST on the sale as well. Speak to your accountant about taxes due on the assignment sale.

Taxes due on an assignment sale:

The taxes on assignments are simple, however, buyers and sellers often confuse the HST taxes. That’s because there are two different HST taxes when talking about preconstruction assignments. Let’s clarify this! All new homes are subject to HST, however, end-users don’t notice the HST tax because the builder pays it and claims a $24,000 rebate on the end-user’s behalf. Alternatively, investors who purchase a pre-construction home are charged around $24,000 in HST, and are then able to claim a rebate for the HST they paid, if they rent the property out for one year. There are situations where an assignment will lose its eligibility for the HST rebate. If someone has lived in the home during interim occupancy, it will no longer be eligible for the end-user HST rebate.

The second HST tax we discuss when selling an assignment is the HST due on the profit. In many cases, the profit is subject to a 13% HST tax. In some cases, even the return of deposits is subject to HST.

The third tax is the income or capital gains tax on the profit. Any real estate property that is not your primary residence, as well as any business venture, is taxable as either a capital gain or as income. It’s really important to speak to an accountant before selling your assignment. Only an accountant can advise you whether you owe HST, capital taxes, or income taxes on your assignment sale.

Is it better to sell an assignment or wait till the condo is ready?

The pros to assigning a condo:

• Receive your deposits and profit sooner
• Avoid market risks. Savvy investors might look to assign their property if they sense the market might depreciate in the coming months/years.
• Avoid paying closing costs (land transfer taxes, development levies, utility hookups, and more). These usually come to a little more than 5.5% of the purchase price
• No mortgage or financing required
• Minimize holding costs (if you sell before interim occupancy or before final closing, there are no property taxes, maintenance fees, utility fees, insurance, mortgage, etc)

Cons to assigning a condo

• Developer restrictions (limiting the marketing of the property, limiting when they are accepting assignments)
• Market perception and buyer’s hesitancy when buying a property sight-unseen
• Market fluctuations suppressing buyer demand
• Limited buyer pool and most of the buyers are investors who want a good deal
• Usually sell for a lower price than comparable resale properties
• Financing challenges for the buyer if the property does not appraise at the new purchase price
• Potentially more taxes compared to closing and reselling

The most common mistakes when selling an assignment:

Hiring the wrong representation, or not relying on professional advice:.

As active realtors in the assignment market, we come across quite a few mistakes. But most of them could be avoided if the buyers and sellers were represented by experienced realtors and lawyers. The agreement of purchase and sale for an assignment is very different compared to an agreement of purchase and sale for a resale home. One of the most common mistakes we see from buyers and sellers is assuming the paperwork their realtors drafted is correct, and forgoeing their right to have their lawyer review the assignment paperwork.

Poor communication/understanding:

This happened to my assignment buyers recently. They purchased a home where the seller’s representative told us the finishes had not been chosen yet. We protected our buyers by including clauses to that degree. However, a few days after the assignment closing, we learned the sellers chose the finishes a few days before closing. Luckily, the developer allowed the buyer to make changes to the finishes at an additional fee.

Ignoring deadlines or dragging your feet:

Assignments come with a lot of moving deadlines, and there are a lot more parties involved compared to a resale property. Always return paperwork and signatures as soon as possible. Compared to a resale property where the only parties are the buyer, seller, and their agents and lawyers, an assignment involves the developer, the developer’s lawyers, the buyer and seller agents, and the buyer and seller lawyers. If everyone took 3 days to return paperwork, the conditional period would lapse and the deal would become null and void.

Incomplete Buyer Vetting:

Buying an assignment requires the assignee to have their mortgage preapproval, as well as their purchase funds available very shortly. If the assignee does not have a mortgage preapproval on hand, it could delay the developer accepting the assignment. If they do not have their funds available it could delay the quick closing as well.

It’s important to thoroughly vet buyers because some builders require the assignor to close in the rare chance the assignee cannot close.

Misunderstanding fees:

Builder’s contracts are not standard forms, and their deposit structures and closing fees can vary from site to site. There are a lot of potential fees when buying and selling assignments and they include, but are not limited to: deposits, seller’s profits, upgrades, lawyer’s fees, interim occupancy rent, utility set-up fees, development levies, realtor commissions, accountant fees, HST, and income taxes. These fees can vary from deal to deal, and when they are payable is different in every assignment. For example, some developers require the homeowner to pay for upgrades when they are chosen, and others charge for the upgrades at final closing.

If you have a preconstruction condo or home that you are thinking of assigning. Feel free to reach out to us for some advice and insight.

Related posts.

6 important facts to consider when selling a preconstruction condo.

Everything you need to know to sell your preconstruction condo assignment

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Rashid Notash, Broker

416-500-5360 | [email protected]

The Condo Assignment Process: Everything You Should Know

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September 15, 2018 | Selling

Condo assignment sales are different from typical pre-construction transactions. Whether you’re on the buyer or seller side, the condo assignment process is unique—which is why you should take the time to learn about the costs, timelines, and other specifics involved.

If you’re thinking about buying or selling a condo on assignment, here’s what you should know…

What is a condo assignment sale.

An assignment sale occurs when a pre-construction condo buyer decides to sell before closing. Since they don’t technically own their unit (which may not be completed yet), what they’re really selling is their purchase agreement with the builder.

The concept sounds simple. However, there are some ins and outs that both sellers and buyers should know to ensure that their transaction is legally above board—and in their best interests.

Seller FAQs

Thinking of selling your pre-construction condo on assignment? Here are some answers to the most commonly asked questions sellers have about the process.

Should I sell my condo on assignment?

Pre-construction buyers often sell condos on assignment as part of an investment strategy. That said, there are other instances where going this route makes sense.

Maybe your lifestyle has changed, and the unit you were excited about a year ago is no longer ideal. Perhaps you’re facing some financial challenges, and you need some cash in the short term. Whatever your circumstances, a real estate agent with condo expertise can help you decide if selling on assignment is right for you.

What are the tax implications of selling on assignment?

While there’s nothing wrong with assignment sales, some Canadian investors have gotten themselves in hot water for making them without paying taxes on their profits. Regulators have been cracking down on these transactions, which is why knowing your taxation responsibilities is crucial.

The bottom line? If you’re making an assignment sale, it’s best to speak with a financial expert before moving forward.

Does the builder need to be involved?

Your Agreement of Purchase and Sale will specify whether selling your condo on assignment is permitted. Either way, you should obtain consent beforehand. There’s a very good chance that builder approval of an assignment sale is a condition in your contract—so read it carefully.

How much will it cost to sell on assignment?

If the builder signs off on your sale, you’ll probably still have to pay a fee. This sum could range from a few hundred dollars to several thousand, and in some instances it is waived by the developer. You should also be aware that, along with the regular costs associated with selling, your legal fees may be higher than they would be for a simpler transaction.

Will I get my deposit back?

A purchaser who is buying on assignment (also known as an “assignee”) usually pays the assignor their full deposit. As part of a typical deal, you should receive the amount you’ve paid to date, sometimes along with your profit, on closing day.

How can I find a buyer?

Be aware that there are marketing restrictions placed on most assignment sales. While it depends on the terms of your agreement with the builder, you probably won’t be able to post on the MLS or online.

If you market your assignment in violation of your contract, the builder may be able to cancel your agreement—and hold onto your deposit. For this reason, working with an agent who knows the local condo market is your best bet for finding a buyer.

Are you thinking of purchasing a pre-construction condo on assignment? Read answers to some of the most common questions buyers have first.

When is buying a condo on assignment a good idea?

If you’re excited about a particular condo development that has no remaining inventory, buying on assignment could be your way into the building. In many cases, the price for a unit is lower when it’s sold this way than it would be if it were on the market as a resale unit.

On the flip side, assignment sales tend to be more complicated than traditional condo transactions. They often entail costs, risks, and legal minutiae that aren’t part of conventional resale and pre-construction purchases.

An agent with condo market expertise can help you weigh the pros and cons of including assignment sales in your condo search.

Can I renegotiate the terms of the agreement in place?

No. When you buy a condo on assignment, you’ll be expected to fulfill the terms and conditions that the original buyer agreed to (and take on any potential risks associated with them). For this reason, it’s very important that you protect your interests by working with an experienced real estate lawyer.

Fortunately, you may be able to negotiate with the seller (or “assignor”) regarding the specifics of your purchase with them. Assignors are often in the midst of a life transition, and they may be eager to make a deal and move on.

Which costs will I pay?

Along with the sum you’ve agreed to, you will almost certainly be expected to pay the assignor the amount they’ve put towards their deposit to date. Unless your contract specifies otherwise, you will be responsible for final closing costs including (but not limited to) land transfer taxes, development fees, Tarion fees, and HST if applicable.

As part of the assignor’s original agreement, development charges may be capped. If this is the case, you could wind up spending significantly less money—so it’s worth looking into.

How will closing work?

Closing on an assignment sale can be complicated for the assignee. You’ll have to go through the process twice: once when your deal is finalized with the assignor, and again when you close with the builder. During the first closing, you’ll pay the assignor their deposit and sometimes the profit. The profit portion could be renegotiated and paid on the second closing. During the second, you’ll pay the developer the remainder of what’s owed.

Don’t forget about the occupancy period! Once your unit is fit to be occupied, you will pay a sum that’s approximately equal to your monthly mortgage payments and condo fees until the building is registered.

What else should I know?

In addition to understanding the assignment process, you should be aware of the pros and cons that go along with buying a pre-construction condo. Your purchase will come with certain risks that the original buyer was willing to take on—such as delays to closing. On the flip side, there’s nothing quite like moving into a beautiful, brand new condo.

When handled correctly, condo assignment sales can be beneficial to buyers, sellers, and developers. Just remember that understanding the process is the key to success—which is why working with the right real estate and legal professionals is so important!

Interested in buying or selling a pre-construction condo? Let’s discuss it! Call or shoot me a text at 416-500-5360, or email me at [email protected].

Condo Assignment - A Guide for Buyers & Sellers

What are assignments all about?

As a purchaser, you will usually wait a couple of years after signing an Agreement of Purchase and Sale (APS) for a condo in the pre-construction phase before actually moving in and taking possession of the unit. Typically, a realtor that specializes in pre-construction will ensure that an ‘assignment clause’ is drafted into your contract, giving you various options closer to the completion date. Why? Your situation may change – nobody knows what will happen between the time you sign the contract and when the building is ready for occupancy. Life happens. The assignment clause allows the original purchaser(s) to sell (assign) the Agreement of Purchase and Sale (contract) and all of its legal rights to a potential buyer. In the assignment world, selling is called assigning, the buyer is the assignee and the seller is the assignor. Assignments can get a little overwhelming for both assignees and assignors, but with the right lawyer/realtor combo, the transaction is a breeze. Let’s dive a little deeper into how you can assign your newly purchased condo unit below.

Who can assign?

Only the purchasers who’s names are listed on the original APS and have a legally valid assignment clause drafted into the agreement have the right to assign their suite. Unfortunately, those purchasers who did not request that the right to assign be written into the agreement at the time of purchase will not be able to get the builder’s approval to assign. Often times, builder consent must be granted before you are able to begin advertising your assignment sale. In order to obtain consent, the developer may have certain criteria that has to be met:

• a percentage of the building has to be sold firm (typically 80% plus) - at this point, the builder has most likely received their construction financing and you are not competing with the sales of their remaining inventory;
• a predefined portion of your deposits must have cleared (for example 3/4 (15%) of an agreed 20% deposit) - we have also seen builders request that any remaining deposits be paid in full and some even ask for futher deposits;
• the builder’s lawyer must grant you approval;

The criteria may vary per developer, but the above is what you should generally expect if you plan on assigning your unit. Make sure that you are aware of your rights and obligations, before committing to an agreement.

How do you assign?

Once you are ready and the builder gives you the go ahead, you can begin advertising your unit. Keep in mind that builders usually do not permit listing the suite on MLS since as a pre-construction purchaser, you do not have title to the unit until final closing. Also, a lot of MLS boards do not allow a property to be listed on the service if the property cannot be physically shown. The best way to gain the most exposure for your listing as an assignor is to contact a realtor who specializes in pre-construction condos. Pre-construction experts have access to different Realtor networks that focus on marketing exclusive "off-market" properties, such as assignments. At inCondo, we also have a dedicated section for our assignment listings . Most developments sell out of inventory quickly upon launch and a lot of buyers are not willing to wait a couple of years to take possession of their investment. These two factors set the stage for the condominium assignment market. Pre-construction professionals have a database of buyers who prefer to purchase a brand-new, never-lived-in unit and since there is most likely no remaining inventory available from the builder, they take to assignment sales.

What are the costs associated with assigning?

The fees associated with assigning your unit vary per developer and can depend on the incentives available at the time of signing the original APS. Builders may charge a fee if you decide to assign your unit – anywhere from free to $5,000+, in order to cover lawyer and administration fees on their end. The assignment transaction between assignor and assignee is separate from the original transaction with the developer. A commission should be paid to the Realtor that brings a client (assignee) and your listing Realtor will charge a marketing fee as well. Commissions are always negotiable. The only recommendation we can make here is to use the services of an agent that understands condo assignments and deals with pre-construction condos. Another fee you will encounter is your lawyer fee. Although assignments are increasing in popularity, most real estate lawyers do not work on assignments and it can be tricky to find an expert. David Feld & Sonia Kalia’s office ( wearelaw.ca ) is an excellent resource for legal assistance with regards to your assignment sale. When you find an assignee and accept an offer, or vice versa, always have your Assignment Agreement of Purchase and Sale reviewed by a lawyer to avoid complications upon closing and title transfer. Fees typically range from $2,000 - $2,500 since there are more contractual elements to inspect (including the original APS) compared to re-sale.

What should I expect while looking for an assignment?

As the assignee in an assignment sale transaction, we highly recommend that you fully read through the original APS with your lawyer to ensure a smooth transfer process. Keep in mind that you will be bound to the terms and conditions set out in the original contract – all of the risks, but also the rewards are passed on. Some of the liabilities include paying HST upon closing (unless you purchase for personal use), disbursing Land Transfer Tax (though first-time home buyers qualify for a rebate), providing the assignor with their deposits paid to date (potentially profits vs. original purchase price as well), and development/educational levy costs (these may be capped in the assignors original APS). You would usually encounter these same liabilities if you were to purchase the unit at the pre-construction phase years prior regardless, but at the assignment stage, there is little to no room for negotiation – all of the original contractual obligations transfer to the assignee. However, there are plenty benefits to purchasing an assignment sale, which include: selecting colours, upgrades and finishes (an assignee would have this opportunity if the purchase occurs approximately 1 year prior to construction completion), enrollment in the Tarion Warranty Program (legislated by the provincial government to protect the buyers of new construction), as well as access to brand new units located in the most desired areas and not available on the re-sale market, while eliminating the threat of other contesting buyers.

Overall, assignment sales are extremely intricate transactions which require your Realtor and lawyer to carry the utmost professionalism and expertise but can be very lucrative for both assignees and assignors. If you are currently searching for an assignment, would like to explore assignment opportunities, or have any questions, we are always happy to help!

Explore Current Assignments

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Really liked how you explained it all. Very well-articulated!

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All About Condo Assignments

— We take our content seriously. This article was written by a real person at BREL.

Some background on pre-construction condos…

To be able to really understand what an assignment is, you need to know a few things:

• When a Buyer agrees to buy a condo from a builder during the pre-construction phase, they sign a pre-construction purchase contract (with a price, terms and conditions, a deposit, etc.)
• When the new condo is built and ready to be moved into, there is a period of ‘interim occupancy’, where the Buyer can take possession (in other words, move into the unit). During the period of interim occupancy, the Buyer does not yet own the condo ; they simply pay the builder an amount roughly equal to what their mortgage payment + condo fees + taxes will equal. No transfer of land has yet occurred, and no mortgage has yet been given.
• Once a building has passed all the city inspections and gone through all the processes to become a legal entity, condominiums are officially registered . During this registration period, condo ownership is transferred to the Buyers, mortgages come into effect and Buyers officially become owners (a.k.a. the closing ). The period between occupancy and registration (i.e. the interim occupancy period) can be anywhere from 3 months to 2 years–though registration typically happens 4-8 months after people begin to move in for the interim occupancy period.
• Sometimes, Buyers of pre-construction condos change their minds and want to sell their condo either before the occupancy period or before the official close. Their life circumstances may have changed, or they may have been speculative investors who never intended on actually taking possession of the unit. Because they don’t yet own the condo, they can’t actually sell it. What they can do however, is sell their contract (their agreement with the builder to buy a unit) to another Buyer. This is what we call an assignment .

What is a condo assignment?

With an assignment, the Seller is actually selling their interest in a property (in other words, their contract with the builder). They aren’t selling the actual condo (as they don’t own it yet); they are selling their promise to purchase a property .

When you purchase an assignment, you are essentially stepping into the shoes of the original purchaser. You can’t renegotiate the price or terms of the contract, you are simply taking over the contract as it already exists.

It’s important to note that some builders won’t allow their original purchasers to assign contracts , or will only do so for a fee (we’ve seen assignment fees from $750 to $7,000). Builder approval to assign a contract is almost always necessary.

Advantages and Risks of Assignments for Buyers

• When you buy an assignment, you take on all the terms and conditions that the original purchaser agreed to – so if he or she didn’t get a lawyer to approve the agreement for example, those risks are passed onto you. While you can have your lawyer review the terms they agreed to, you can’t renegotiate them.
• You also take on the usual risks of buying a pre-construction condo: time delays, changes to the unit or building, extended interim occupancy periods, etc.
• Depending on what stage of construction the condo is in when the contract is assigned to you, you may or may not be able to be involved in selecting finishes and upgrades .
• Because it’s a new construction condo, HST may apply. If you don’t actually move into the unit, you’ll be responsible for paying tens of thousands of HST on closing.
• When a condo is assigned to you, you generally have to mirror the deposit that the original purchaser has paid to date . So rather than providing the usual 5% deposit for a resale condo, you may be required to provide 15% of even 20% as a deposit. If you are a first-time buyer with a lower down payment, you may not be able to afford the deposits required for an assignment.
• With an assignment, you will be eligible for the Tarion warranty program , which provides years of warranties against defects and problems with your condo, and because all the appliances will be new too, they’ll also be covered by warranties.
• When the unit is officially registered and you close on the purchase, you’ll be responsible for all sorts of closing costs that don’t apply to resale units. These ‘ builder adjustments’ apply to all new construction projects and include development and education costs, HST on appliances, utility connections fees and Tarion fees. These builder closing costs can easily amount to 1-3% of the original purchase price (and there’s talk of the development fees doubling in Toronto in the near future). If you’re looking at taking over someone else’s contract via an assignment, look to see if the original purchaser capped the amount of these costs when they originally negotiated the unit. Otherwise, make sure you have lots of money put aside for closing costs.
• Legal fees to purchase an assignment condo are generally higher than typical resale condo purchases. For a condo under $500K, plan on legal fees around $2,500 (vs $1,800 for a resale).
• When you close on the actual purchase with the builder, you’ll need to pay land transfer tax . Because no land ever exchanged hands, the original purchaser will get to avoid paying land transfer tax.
• Going through the assignment process can be a great way to purchase a condo in a building that has no remaining inventory , and often the actual purchase price (before closing costs) is lower than it will be once the building has registered and the condos are offered for sale in the resale market.

The assignment process is a tricky one, with risks, legal requirements and paperwork that doesn’t look anything like the usual agreement of purchase and sale for a condo.   If you’re considering an assignment, make sure you work with a REALTOR who understands the intricacies of assignments and can guide you through the process. As always, we’d be happy to help!

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Do you have 2 bedroom unit in 50 Wellesley?

Melanie Piche says:

No sorry, we don’t have anything at 50 Wellesley right now.

Clinton says:

Can you explain how the above might affect an “assigned sale” property being rented out?

In other words- if I purchased a unit – and it’s currently under assigned sale and I wish to rent it out in an unfinished building at the moment is there anything the prospective tenant should know ahead of time?

The original agreement of purchase and sale with the builder will define what’s allowed during the occupancy period – some builders restrict rentals completely, some want to approve them, some allow rentals if the buyer uses the builder’s agent and some let people do whatever they want.

Vanessa says:

Do you have any advice on selling a condo assignment? How successful are they?

Condo assignments aren’t easy or in huge demand, but if you bought in a sold-out building that people are still interested in, it’s totally possible. That assumes you have the right to assign the unit in your contract of course…

If the Agreement of purchase and sale stated that prior to closing, the purchaser covenants and agrees not to sell, lease, transfer or assign this Agreement or unit, could I still be able to assign the unit if I pay a fee with the vendor written consent?

It sounds like you’ve agreed not to do it in your contract…you’d have to talk to the builder to see if they are are open changing the terms of your contract.

Sha Song says:

If i am buying an Assignment with a tenant in the unit in May and i plan to use it as my primary residence after final closing in September 2016. Does the few months of rent I receive from the tenant affect my qualification for the HST rebate?

You’ll want to check that with your lawyer…HST rebate laws are complicated and beyond the scope of what we can give advice about. Good luck!

mohsen says:

if i buy an assignment condo with a purchase price higher that what original buyer paid, how is the land transfer tax calculated? Builder only charges tax based on original purchase price. How should I declare the purchase price, so when i sell the condo few years down the road and if I have to pay capital gain, I won’t have to pay capital gain based on the price I actually paid?

Excellent questions! You’ll want to talk to your lawyer/accountant about that…that’s outside of the scope of the advice we can give.

Brendan Powell says:

You might find this Ministry of Finance bulletin useful:

http://www.fin.gov.on.ca/en/guides/ltt/guidenote1.html

Generally though, when it comes to land transfer tax you are paying tax on the value of what you bought, i.e. What YOU paid. For capital gain, I expect you only pay tax on whatever gain YOU had. Gain that happened on someone else’s watch is their problem!

As Melanie says though, you need an accountant and lawyer to advise on your particular situation.

sorry in my last comment, I meant ” I won’t have to pay capital gain based on the price original buyer paid”

if I buy an assignment property, do I pay the despoits to original buyer right away or do I wait until closing also do I have to get mortage pre approval right away or can I wait until later.

Pooja says:

How likely is it that a seller is able to get a higher price on an assignment than they paid? If they do, then is the buyer required to pay the entire amount at once?

Many people successfully assign properties at a premium. On the closing of the assignment, the buyer pays you whatever deposit you paid the builder + any profit you’ve agreed on. They pay the rest of the money (usually via mortgage) to the builder when the building registers.

Sandra says:

Hello, I am looking to assign my newly-built three-bedroom townhouse in Mississauga (close to Erin Mills Town Centre mall) as I am moving out of the country. My agent said that we are not allowed to advertised on MLS so how are we supposed to find potential buyers then? Word-of-mouth really restricts the buyers pool. Well, if anyone is interested please let me know by responding to this comment. Thanks.

Where and how you are allowed to advertise an assignment is set by the builder and would have formed part of the Agreement of Purchase and Sale that you signed. While it’s sometimes possible to negotiate these things while you’re making the purchase, if you signed something that restricted marketing, unfortunately you’re options are few. Hopefully you’re working with an agent who does a lot of assignments and has a ready list of buyers!

Jamey says:

Actually, I am not sure if you would answer to my question but… I at least wanted to try as I am very desperate to hear 3rd expert’s invaluable opinion. I am in the process of buying an assignment and currently waiting for a builder to approve my contract with an original purchaser. My issue here is… this approval has been pending for about 6 months now and I was wondering if it is a common case. Regardless it’s common or not, what reason do you think there is, why the builder put a hold on to approve this agreement this long? The original written contract between the original seller and the builder clearly indicates that their contract can be assigned one time before the condo registration so this whole thing was totally allowed.

It would be deeply appreciated if you could provide some thoughts on this. Thank you very much.

I’m not able to answer your question because it’s a current transaction, and of course, I don’t know the whole story. I would suggest you talk to the agent who is representing you – they should be able to shed some light on what’s going on!

Dawn Renwick says:

Hi, I am an international investor who recently purchased a condo which will complete in 2020. I am instructed that if I want to sell once we approach completion this is called an assignment. In my contract there are no restrictions as long as 90% of the units have been sold. My question is as an international investor is there any other tax implications that I should be aware of??

You should talk to your realtor and an accountant to understand the current tax situation (which of course may very well change by 2020).

Could assignement fees be negotiated with the builder?

Yes, during the initial negotiation of the purchase contract.

yusuf matadar says:

MLS allow to advertise underconstruction condo for sale if builder gives consent to do so ?

Could you “sell” your assignment to your kids? Of course without a profit on my end, at the price of the purchase I have made years ago when it was still cheap? What costs other than the legal and developer fees do I need to consider?

You can sell your assignment to your kids at whatever price you want..though check with an accountant to see if there are any tax implications for either of you. Legal fees are usually the only thing you’ll need to account for, other than builder assignment fees. Developer fees and land transfer taxes would be paid by your kids..

What percentage would you typically purchase an assignment compared to an actual closed unit?

The price totally depends on what’s happening with demand/supply in the building…closed units usually come at a premium (given additional costs incurred by the buyer) but it is building-dependent.

Thanks for the helpful article (and comments!). I bought a unit off-plan in Feb 2015 and the property has definitely increased in value since that time. The latest interim occupancy date is for June 2018 but I’m considering selling my unit on assignment – do you have any guidelines for setting the price?

I’d suggest you work with an agent who is experienced with assignments! They’ll be able to help you set the price and find a buyer. Happy to connect you with our assignment specialist – just email [email protected]

Hi When I buy an assignment, wondering if I can get a mortgage on an assignment price? Or the original price will be the price that I can get mortgage on

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Everything you need to know about selling an assignment condo

Selling an assignment condo is not the same as dealing with a resale condo sale. You have to navigate many potential challenges and regardless of present market conditions, it can take time and skill to complete a deal. Depending on the contract you signed with the builder you may not even be allowed to sell the condo on assignment. If they do allow it, see below for a guide on everything you need to know about selling an assignment condo in the GTA.

What is an assignment sale?

An assignment sale is a transaction in which a buyer (the “Assignor”) has purchased a property and then sells their interest in that property to another buyer (the “Assignee”) prior to the property closing. Essentially, as the Assignor you are not actually selling the property; you are selling their contract along with the rights and obligations of the original agreement with the Builder or original seller. While it is possible to have an assignment sale of a pre-construction house or a resale property, assignment sales in Toronto are most common in pre-construction condos.

If you are looking to sell your condo prior to the building’s closing date you are the Assignor. In other words the original buyer of the condo unit in the pre-construction phase. In an assignment sale, the assignor is the seller.

The assignee is the buyer of the assigned condo and takes over all rights and responsibilities of the original contract.

Make sure that the agent you are working with is familiar with the process of selling an assignment condo. Most agents have no experience in assignment sales, so be careful who you choose to represent your best interests.

Cons of selling your condo on assignment

• The builder may have restrictions on how you can market your assignment condo. Your first step should be checking with the builder or reviewing your APS (agreement of purchase and sale) on what is allowed.
• The pool of buyers is limited due to the substantial amount of cash required.
• Due to the complex nature of an assignment condo sale, the legal fees will be higher than resale condos.
• (as of May 7th, 2022) New tax rules will severely cut into your profits, if any.

Pros of selling your condo on assignment

• Pre-con condos take years to complete and if your lifestyle changes it allows you to walk away, oftentimes with a profit.
• You avoid costs such as land transfer tax, occupancy fees, etc.
• You can get your deposit out earlier and you may even be able to negotiate the profits sooner than the building closing.

Looking to sell your investment property via assignment?

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Marketing an assignment condo

Some builders in Toronto and the GTA have restrictions on listing your assignment deal on TRREB’s MLS or online in general. Essentially they are making it hard to impossible to market the property. Ensure that the Realtor you are working with has access to a network of Realtors that work in pre-construction and assignments. I have done several transactions this way and while it is more difficult to market properties this way, as opposed to marketing it online to the masses, it is possible.

Holding onto the property until completion and selling it on the resale market.

This is becoming a more common solution for many since the NEW TAX RULES for assignments came into effect in May 2022 (see details below). Neither option is the clear winner as you will either have to share a large portion of the profit with the government or incur expenses to close the deal. If you decide to complete the deal with the builder, and then sell it on the resale market you will incur the following expenses.

• Monthly occupancy fees (these are charged from the beginning of occupancy to the builder completion date, usually between 3-12 months depending on varying circumstances).
• Development charges and levies. Fees vary, for GTA condos it’s typically capped at around $10,000 – $20,000.
• Legal fees – approximately $2,000
• Status certificate – $100
• Tarion fee – $700
• Reserve fund – $700
• Various admin fees – $2,000

FAQ’s

How does hst work on the builder purchase price.

If you are selling your property on assignment, the assignee (the buyer of the assignment condo) will assume all HST responsibilities for the original purchase price as they will be the ones doing the final closing on the unit. In most cases, HST is included in the builder’s price assuming that the buyer will use the property as a primary residence. Ensure that your Assignment purchase agreement has clear wording on who is responsible for which taxes.

When is the closing date?

In an assignment sale, there are two closing dates. The first closing date is when the sale has been approved by both lawyers and the builder. The second closing date is when the building is registered.

Who pays for the builder assignment fees?

Generally, the assignment fees, if any, are due to the builder upon the builder’s approval of the assignment sale.

When will I receive my profit?

There are typically two options. You’ll either get the profits once the building closes (2nd closing) or when the builder approves the assignment sale. Depending on the market and your Realtor’s negotiating skill you should aim to get the profit as early as possible since the building closing could be a long time out.

New HST assignment rules

As of May 7, 2022, assignment sales in Ontario are subject to HST. When assigning a property to a buyer, the Assignor (seller) will have to pay HST on the profit portion of the proceeds regardless of what their initial intentions were when purchasing in the pre-construction phase. HST does not apply on deposits already made by the Assignor to the Builder, but you have to ensure that your Assignment Agreement of Purchase and Sale must include that the assignment price already includes the deposit.

New Income Tax on assignment sales

Assignment sales are now also subject to income tax. Pre-May 2022 you would only have to pay capital gains tax on the profit, which means you would only pay tax on 50% of the profit. Now 100% of the profit gets taxed and depending on your income that year you will likely fall into a higher tax bracket.

All assignment sales should be conditional upon your lawyer reviewing the entire assignment agreement. Part of that will be all of the contents and disclosures of the original Agreement of Purchase and Sale between the Assignor and the Builder.

You may also like:

• Bank of Canada maintains policy rate | February sees some buyers returning

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Selling your tenanted condo in Toronto | A complete guide

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What Is A Condo Assignment?

When purchasing a pre-construction condo unit, a buyer signs an Agreement of Purchase and Sale with the condo builder, that reserves their ‘right’ to the unit they purchased.

An “ Assignment ” is when that condo buyer then sells the condo prior to the completion of ownership. This typically happens between the time they originally signed for the condo, and the time the building is completed.

A “Resale” transaction is when a seller actually has ownership, the building is completed and already registered, and they decide to sell. This is different than an Assignment sale.

In the case of an Assignment sale, the seller doesn’t actually own anything other than an Agreement of Purchase and Sale they originally signed. The condo isn’t registered yet, and in some cases, the condo isn’t even built yet. They are selling the “right” to that condo. So, the seller is “Assigning” ( or selling ) that Agreement of Purchase and Sale and the rights of the condo over to the new buyer.

Benefits of an Assignment for Sellers:

• Sell before you close
• Avoid closing costs
• Avoid occupancy fees
• No need to get a mortgage
• Cash out (get back the deposits you have paid and profit)

Benefits of an Assignment for Buyers:

• Buy a brand new, never lived in condo
• No Waiting (pre-construction condos typically take 1-5 years to build)
• Tarion Warranty
• Original VIP incentives on the contract
• Stronger negotiating power

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What You Need to Know About Condo Assignment Sales

• 9 months ago
• Real Estate , Residential

Welcome to the world of condo assignment sales, a dynamic real estate market aspect that offers unique opportunities and specific considerations. Whether you’re a seasoned investor or a first-time buyer, understanding the ins and outs of condo assignments is crucial to making informed decisions in this niche market.

This comprehensive guide will delve into the essential aspects of condo assignment sales, from defining what they are to exploring the benefits and potential pitfalls. We’ll walk you through the process, highlighting key factors to consider and providing valuable insights to help you confidently navigate this territory. Whether you’re intrigued by the investment potential or simply curious about this lesser-known facet of real estate, this guide aims to equip you with the knowledge you need to make wise choices in condo assignment sales.

So, whether you’re seeking to capitalize on pre-construction appreciation, looking for a unique investment avenue, or aiming to secure your dream home, join us as we unravel the layers of condo assignment sales and empower you to make informed decisions in this intriguing landscape. See more assignments for sale in toronto

Understanding Condo Assignment Sales

Before delving into the intricacies of condo assignment sales, let’s start by understanding what they entail. A condo assignment sale occurs when a buyer decides to sell their pre-construction condo unit before the building is completed, and they take possession. In essence, the original buyer “assigns” their purchase agreement to a new buyer, who then steps into the shoes of the original purchaser, assuming their rights and responsibilities.

Why Condo Assignment Sales Happen

There are various reasons why condo assignment sales might take place. For the original buyer, circumstances might change, leading them to sell before the building is completed. This could be due to changes in their financial situation, personal plans, or investment strategies. On the other hand, buyers interested in acquiring a condo assignment might be attracted by the potential for capitalizing on pre-construction appreciation, acquiring a unit in a desirable location, or entering the real estate market without committing to a lengthy pre-construction timeline.

Navigating the Process

Navigating a condo assignment sale entails several procedures that demand careful thought and attention to detail. The initial purchaser often decides to sell their unit first, which initiates the process. They could decide to promote it themselves or work with a realtor who takes on condo tasks. The assignment is usually subject to the developer’s approval once a new buyer is located.

Upon approval, the new buyer accepts the terms and conditions of the previous buyer’s purchase agreement. This indicates that they will take ownership of the unit after the building is finished and take on financial responsibility for all related expenses, including closing costs and any outstanding deposits. Both parties must consult legal and financial professionals to guarantee a smooth transfer of rights and liabilities.

The Benefits of Condo Assignment Sales

Engaging in condo assignment sales can offer several benefits to both buyers and sellers. Let’s delve into some of the advantages that make this real estate strategy appealing:

For Buyers:

Investment Opportunities: Condo assignment sales can allow buyers to invest in properties that might not be available through traditional listings. This can lead to potential appreciation and rental income.

Choice of Property: Buyers can choose from various properties, often in desirable locations and well-established buildings.

Potential Savings: Purchasing a condo assignment might offer savings compared to buying a brand-new unit from a developer, especially if the original buyer secured a lower price during the pre-construction phases.

Less Waiting: By buying a condo that is still under construction, buyers can escape the waiting period. The time they take to take control of the property is typically shorter with assignments because it is typically near completion.

For Sellers:

Profit Opportunity: Sellers can profit from an assignment sale if the property’s market value has increased since the original purchase. This can result in financial gain without ever taking possession of the unit.

Flexible Exit Strategy: Condo assignment sales give sellers a way out if their situation changes before the building is finished. In this way, they might avoid possible fines for backing out of the sale. They can transfer the purchase agreement to another buyer.

Avoiding Closing Costs: By selling the assignment before the property’s completion, sellers can avoid some of the closing costs associated with ownership, such as land transfer taxes and occupancy fees.

Reduced Risk: Sellers who cannot complete the purchase for various reasons, such as changes in financial circumstances, can transfer the responsibility to another buyer. This can prevent potential legal and financial repercussions.

Participating in condo assignment sales in both situations enables people to exploit the real estate market. Buyers can access more options and investment opportunities, while sellers benefit from financial advantages and flexible exit strategies. However, it’s crucial to recognize that condo assignment sales could also come with hazards and complexity that need careful thought and expert advice.

Tips for a Successful Condo Assignment Sale

Navigating the world of condo assignment sales requires careful planning and consideration. Whether you’re a buyer looking for an investment opportunity or a seller aiming to transfer your purchase agreement, here are some essential tips to ensure a successful transaction:

Research the Property: Thoroughly research the property, its location, the developer’s reputation, and the building’s amenities. Make sure the condo aligns with your investment goals and preferences.

Financial Preparation: Assess your financial situation and secure financing well in advance. Condo assignment sales require a higher down payment, so ensure you have the funds available.

Understand the Agreement: Carefully review the original purchase agreement and any additional documents provided by the seller. Be aware of any restrictions or conditions set by the developer.

Due Diligence: Conduct due diligence on the seller’s motives for selling the assignment. Ensure that the seller has complied with all legal requirements and that the assignment is legitimate.

Developer Approval: Confirm whether the developer permits condo assignment sales and the transaction terms and conditions. Developer consent is crucial for a successful assignment.

Early Planning: Plan early if you’re considering selling your condo assignment. Understand the assignment process, potential fees, and timelines involved.

Assess Market Conditions: Evaluate the current real estate market conditions to determine whether it’s a favorable time to sell. Be aware of any fluctuations that might affect the property’s value.

Seek Professional Advice: Consult with legal and real estate professionals who have experience with condo assignment sales. They can guide you through the process, ensuring all legal aspects are covered.

Transparency: Tell potential buyers about the assignment sale and the property’s history. Providing accurate information builds trust and increases the likelihood of a successful sale.

Negotiation: Be prepared for negotiations with potential buyers. Price, assignment fees, and other terms must be discussed and agreed upon.

Documentation: Ensure you have all necessary documentation, including the original purchase agreement, amendments, and relevant correspondence with the developer.

In conclusion, condo assignment sales can be lucrative for buyers and sellers but require careful consideration and adherence to legal and procedural requirements. Individuals can confidently navigate this real estate avenue by conducting thorough research, seeking professional advice, and understanding the nuances of the assignment process.

Navigating Condo Assignment Sales: A Wise Move with Expertise

As you embark on your journey into the world of condo assignment sales, it’s crucial to approach this real estate strategy with thorough research, professional guidance, and careful consideration. While the potential benefits are enticing, the intricacies of assignments can be intricate, and missteps can lead to financial and legal complications.

Before venturing into a condo assignment sale, consider these key takeaways:

Seek Professional Advice: Engage with experienced real estate agents, lawyers, and financial advisors specializing in assignment sales. They can provide valuable insights, guide you through the process, and protect your interests.

Know the Agreement: Carefully review the original purchase agreement and the condo corporation’s bylaws to understand any assignment restrictions, fees, and requirements.

Market Research: Understand the local real estate market trends, property values, and assignment demand. This knowledge will help you make informed decisions about buying or selling.

Financing: If you’re a buyer, be sure you have the finances to finish the transaction once the house is ready for habitation. The assignment process may involve financial liabilities for sellers, which they should be informed of.

Legalities: Have legal experts review all contracts and agreements to ensure they comply with relevant laws and regulations.

Risks and Rewards: Recognize the risks and benefits associated with condo assignment sales. Although there are potential profits, the outcome may be affected by market changes and unforeseen situations.

Transparent Communication: Whether you’re the buyer or the seller, keep lines of communication open and honest with everyone engaged in the transaction. This will make the process run more smoothly and prevent misunderstandings.

Condo assignment sales can be a strategic approach to real estate, offering opportunities for buyers to access sought-after properties and for sellers to profit from market appreciation. However, success relies on expertise, diligence, and prudent decision-making.

As you navigate the world of condo assignment sales, remember that knowledge is your greatest asset. By equipping yourself with the right information and enlisting the support of professionals, you can make confident choices that align with your real estate goals. Whether you’re exploring assignments to invest, upgrade, or optimize your property portfolio, remember that a well-informed approach will always yield the best results. Happy navigating!

GTA Assignment

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Condo Assignments Explained

By Condo Culture

__What is an assignment sale? __

In preconstruction, a condo unit isn't owned by its purchaser until all units in the condo development have been completed and the building has been registered. Only a purchaser’s legal rights and obligations outlined in the Agreement of Purchase and Sale (APS) can be sold prior to the building's completion. This is referred to as an assignment sale. The seller of this contract is the assignor and the purchaser, the assignee.

__Why Do Assignment Sales Happen? __

Preconstruction condos can take years to build. During the construction of a new condo, the circumstances of the original purchasers can change and they may no longer be willing or able to fulfill their financial obligations. When this happens purchasers can opt to sell their purchase contract to a willing buyer.

How much do Assignment Sales Cost?

There may be a fee associated with assignments. This fee can range between $3,000-$5,000 and is to be paid by the assignor. In some situations, developers may also waive this fee.

There are also a number of other legal and real estate costs and tax implications to be considered. As assignment sales may be more complex than other real estate transactions it is important that assignors and assignees work with a team of experienced real estate, legal and accounting professionals who understand assignment sales, are able to protect the interests of all parties involved and are able to simplify the process saving both money and time.

__Who pays what and when? __

Upon acceptance of a conditional offer, a deposit will be required to make the agreement legally binding. This amount can be negotiated.

Soon after, once the conditions have been satisfied, the assignee will be required to provide another deposit. In many cases, this deposit will be the same amount that was provided to the developer when the unit was originally purchased by the assignor (i.e. 15%).

Depending on the terms of the assignment the assignee will also be responsible for paying the profit (the difference in the assignment price and the original condo purchase price) to the assignor 1. once the developer approves the process or 2. when the seller takes possession and receives a mortgage. At Condo Culture the latter is most commonly seen.

Because a mortgage cannot be obtained at the time of the assignment sale (only once the development has been completed and registered), it is important that the assignee has access to enough cash on hand to cover the assignment and all of the associated costs.

Upon purchasing the assignment contract the assignee assumes responsibility for all outstanding costs relating to the condo at closing and during occupancy.

__What is an assignment clause? __

This is a clause that must be included in the APS to allow assignors to sell their contract through an assignment. Without it, assignments will not be permitted by the developer. If this clause is not included in the original APS, a request can be made to have it added as an amendment at the time the unit is initially purchased. In some cases developers may also not allow for assignment sales.

Advertising an assignment?

Most builders in the region will not permit the advertisement of assignments on MLS or realtor.ca. Be sure to consult with your realtor, lawyer and the developer for clarification on what is legal and permissible. Condo Culture uses its website, social media and internal client database to help advertise and sell assignment listings for its clients.

Benefits of Assignments for Assignees?

• Access to a Project that may be already Sold Out - Purchasing an assignment can be a great way to get into a project that is in high demand and otherwise sold out. The first phase of Station Park for example launched and sold out late 2019. Interested purchasers can still access this project however by purchasing one of the current assignment sales available. See our featured listings for more information.
• Value Opportunity - In some scenarios, assignments may be as a result of an assignor who is motivated to sell based on changes in life circumstances. In these situations, it may be possible to negotiate and purchase an assignment at a reduced price. Assignments may also present opportunities to purchase at a lower price than eventual market values at time of building completion (ie you purchased an Assignment 6 months before building completion when market values are rising).
• Less Competition - Given that assignments are a unique product type, many purchasers and even some realtors aren't as familiar with them. This may mean less competition for these units, which can be advantageous to purchasers especially in extremely competitive real estate markets.

__Benefits of Assignments for Assignors? __

• Freedom - By selling your assignment contract, you are no longer legally obligated and binded to the terms of your APS. You also have the freedom to use or reinvest the money of the assignment as you see fit.
• Profit - Where the price of the condo unit has increased significantly since it was initially purchased the assignor may be able to sell an assignment and realize a profit. Many developers discourage using assignments solely as a strategy to profit and it is strongly advised that assignors fully understand all costs associated with an assignment before attempting to do so.
• No Closing Costs - Because the assignment is sold prior to construction completion, the assignor will not have to take out a mortgage or be responsible for any of the closing costs.

For more information on assignments in the Waterloo region, watch this video where Condo Culture Sales Representative Tim Bolton, discusses the assignment process at CIRCA 1877, one of Kitchener-Waterloo's newest and most sought after condo developments.

At Condo Culture, we are experts in all things condos, this includes condo assignment sales.

Click here to speak with a Condo Culture representative to learn more about how assignment sales work or to discuss buying or selling an assignment.

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• Presale Condo Guide

What is A Condo Assignment?

Have you heard about buying a condo on assignment?

It’s becoming more and more common in the real estate market. But can you really take over another person’s mortgage?

Let’s take a look at how assignments work, their advantages, disadvantages and how you might use this strategy to get your dream condo.

Defining Assignment of Contract

An assignment is when a Seller (assignor) sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser.

When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract.

The Buyer (Assignee) of an assignment is essentially stepping into the shoes of the original purchaser.

In short, an assignment clause allows the assignee (buyer) of a home to sell the place before they take possession of it. 

Are Assignments Legal?

Yes. Real estate contracts are assignable under the law unless the contract expressly forbids it.

Assignments are legal and can be a beneficial tool for both buyers and sellers when done correctly.

Example: If a buyer’s financial or personal circumstances change prior to completion, 

They can assign the contract to another buyer without canceling the arrangement with the seller if they choose to.

How is Assignment Different from A Regular Real Estate Transaction?

Assignment of Contract differs from a regular real estate transaction because in an assignment you are not buying or selling a home, rather you are buying or selling an interest in a contract to purchase a home once it’s complete.

The Paperwork involved with an assignment is a bit more complicated than your standard Real Estate Transaction.

Why do Assignments Happen?

1. buyer’s circumstances.

Often when people invest in pre-construction condos, there is a significant amount of time between when the initial contract is signed and the completion.

During that time, it’s very common that a Buyer’s circumstance might change like: loss of employment, death, critical illness etc. What worked for a Buyer few years ago may not work at the time of closing.

2. Financial Constraint:

Another reason is that that buyer might not be able to complete on the transaction due to insufficient funds or financing problem.

In some cases, it is cheaper to assign the contract to a new buyer than reneging on the sale.

3. Speculative Investing: 

Some investors just don’t have the intention of closing on the property and they are banking on quick appreciation of the property.

In resale, assignment of contract for profit is less common now than it used to be.

What is the Role of A Builder in Assignment Sale?

Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and read it.

Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder

There may be additional requirements as well, the most common being that the Builder has to approve the assignment.

Are There any Marketing Restrictions on Assignments of Contract ?

Yes, depending on the details of our contract, it will stipulate whether or not you can assign the contract or not and other terms & conditions.

One of the most common condition is: No Advertising on MLS, Realtor.ca or public facing forums, which makes it hard for a realtor to sell assignments

LUCKILY, there is a solution.

Realtors at Ipresale condos  specialize with assignment sales. They won’t advertise the property but they will use their current network and tap into their resources to get you best possible deals on your assignment.

Assignment Buyer's FAQs

#1: can i renegotiate the terms of the agreement in place.

No. When you’re buying a condo assignment, you’ll be expected to fulfill the terms and conditions that the original buyer agreed to

There might be some potential risks associated with buying an assignment, so it’s very important to work with an experienced real estate lawyer.

However, assignors might be amid a life transition, and they might be eager to make a deal and move on, which might help you get a better deal

#2: Which costs will I pay as a Buyer?

When purchasing a condo assignment, you will be responsible for all the closing costs when the building is registered with the city.

Closing costs include Land Transfer Tax, Development Charges, Utility Connection Fees, HST and any legal fees. It is also at registration that your mortgage will officially begin.

Keep in mind, you are completely exempt from HST on a pre-construction condo if you plan to use the property as your principal residence. Investors who are leasing their condo will need to pay HST upfront.

Your real estate lawyer can file for a full HST rebate, refunded approximately 4 to 6 weeks later, provided you have a one-year lease in place.

#3 Buyer's Advantages of Assignment

Brand New Suite:  You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract.

Built In Equity: When someone is selling a condo before closing, they are typically leaving some of the equity that the condo has earned on the table for you to inherit.

Less Competition:  Fewer people know about assignments.

Better Deal:  Sellers usually need to sell because they need to drop their equity. This can give you leverage for prices, deposits, and closing dates.

Assignment Seller's FAQs

#1: how will i get my deposit back.

The major fees when selling an assignment include the builder’s assignment fee, real estate commissions, and potential tax on the profit.

 Builder’s assignment fees can range from $1000 to as high as $20,000, depending on your contract.

  Real estate commissions on assignments are paid by the sellers. The assignment fee and builder’s lawyer fee is also paid by the sellers.

The profit earned from an assignent sale might be subject to tax. Only a tax accountant  that specializes in or a real estate transactions can advise you how best to claim your profits.

We have a team of accountants at Ipresalecondos.com , t hat can help you get started. Please contact us f or more information

#2: What Costs will I Pay as a Seller?

When a buyer buys on assignment (also known as a “assignee”), they normally pay the assignor their entire deposit.

On closing day, you should receive the money you’ve paid so far, combined with your profit (sometimes), in a conventional agreement. 

#3: How will I get my Deposit Back?

On closing day, you should receive the money you’ve paid so far, combined with your profit (sometimes), in a conventional agreement.

#4: How can I find a Buyer?

The builder may be able to cancel your agreement—and keep your deposit—if you market your assignment in breach of your contract.

Therefore, engaging with a seasoned realtor who is familiar with the assignment condo market is your best bet for finding a buyer.

Please contact us for getting started with an Assignment of Sale Pro

As an informed consumer you should be aware of the pros and cons of purchasing a pre-construction condo in addition to comprehending the assignment procedure.

Condo assignment sales, when done appropriately, can benefit purchasers, sellers, and developers. Just keep in mind that the paperwork involved with an assignment is a bit more complicated than your standard real estate transaction.

Many agents and even real estate lawyers are not familiar with this type of sale, so make sure you use an agent who’s familiar with how to complete an assignment sale.

At Ipresale Condos we have handled a number of assignments for our clients.

Please call or text at 604-825-8881 or email at  [email protected]  for an Assignment Pro.

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What is a Condo Assignment Sale? — Everything You Need to Know

What is a condo assignment sale, when does it occur.

Condo assignment sales occur before the final occupancy or closing date of a new construction property. An assignment sale occurs before the final closing of the property between the original purchaser (Assignor)  and the builder. 

As a new purchaser of an agreement, you are going to assume everything that the original purchaser agreed to in their original contract. For this reason, it is important to appoint a lawyer by your side to go over two important set of agreements. The first one is the agreement between the original purchaser and the builder. Lawyer will walk you over red flags or things like closing costs associated to the unit – remember you have to assume these terms. The second piece of agreement the lawyer will look at is the new agreement between the original purchaser (Assignor) and the new purchaser (Assignee) 

Reason for a Condo Assignment Sale

Assignment sales take place with all sort of new construction product such as townhomes, detached homes, condos, stacked townhomes & more. Why do these kinds of sales happen? The most common reason is the original buyer’s circumstances might change and present a reason to list their condo for assignment sale transactions. 

There are many reasons why one would decide to sell their unit on assignment since the gap of purchase time to occupancy is wide and can take 2-7 years depending on what type of property it is. Perhaps they will welcome a new member of their family soon and the condo just isn’t big enough for everyone. Whatever the reason, it isn’t always negative. It is important to work with professionals that can guide you throughout the process of an assignment sale.

Costs of Condo Assignment Sales​

Is selling an assignment better than a regular real estate transaction? Yes. Being the seller (assignor) is known to contain more tax fees than a unit that is already built and you’ve taken title of. As a buyer of an assignment, you do not need to observe such fees and a professional can walk you over your closing costs associated to the transaction. 

Now that you know what is a condo  assignment sale, you can therefore make an informed decision. We get a lot of questions about new condos and whether it’s better to wait or to list them for assignments right away. 

An assignment is better if you’re looking to get your money back sooner rather than later. Assignments will also see that the assignee pays the land transfer taxes and other taxes. Sometimes you can even make a profit on the market value if condo assignments are listed during a real estate boom.

It all sounds great, but selling condo assignments also has its drawbacks. For example, experienced real estate agents know it’s more difficult to sell an assignment property due to a much smaller buyer pool. Most assignment sales cannot be advertised online on platforms such as MLS. 

In most cases,, there are  marketing limitations when it comes to selling an assignment which can hurt your chances of finding a potential buyer

If you are looking for a new home sooner rather than later, an assignment sale offers closer occupancy dates, unlike purchasing something new that will only be ready in 5 years. In some cases, you may still have a chance to choose your own colours and finishes of the unit

Pros and Cons of Condo Assignment Sales for Buyers​

As a  buyers, you can expect to see advantages such as more options when choices are low. Since assignments are more complex, you typically face less competition on deals whereas in a hot market you may be in a bidding war scenario.

Pros and Cons of Condo Assignment Sales for Sellers​

The pros for assignment sellers are a shorter list compared to the ones for buyers. First of all, sellers can get their money faster and put that amount to good use such as reinvestment. Sellers will not be responsible for carrying costs such as occupancy fees or go ahead with the mortgage payments or other closing fees.

At times, the seller can also play the market and list the unit for higher than the original purchase price and make a profit. However, more often than not, sellers will have a harder time seeing offers due to marketing restrictions and a smaller buyer pool.

Since the process for assignments is also much more intricate, it will be difficult to find a  real estate professional out there that is familiar with this type of sale. For this reason, an assignment transaction can come with more complexity and would require additional knowledge. 

Now that you know what is a condo assignment sale, you can decide if it’s the route you want to take as a buyer or seller. There are more advantages from a buyer’s standpoint, but there are undeniable pros for sellers such as getting your money back faster and avoiding closing costs.

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GTA-Homes » Real Estate Info » Assignments

• Assignments

An Assignment Sale in the Pre-Construction Market

Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself. Only the contract can be sold.

When you purchase a pre-construction condominium unit, you may be given an assignment clause in your original Agreement of Purchase and Sale (APS). This is key. This clause gives you the ability to sell the rights to your unit before the condominium is even registered.

• Assignee/Buyer is not buying a property from Assignor – Assignee is buying the “right” to acquire property from a 3rd party (usually a builder)
• Assignor assigns its interest and rights in the Original Agreement with the Builder (or original seller)
• Assignor assigns to the Assignee its interest in the original “deposit”
• Assignee “assumes” and agrees to perform all of the Assignor’s obligations under the Original Agreement

Once the building has been constructed and registered by the city, the ownership will be transferred to the buyer. Until then, it’s just the sale of a contract, but as you will see, there are many advantages to these kinds of sales for both the buyer and seller.

In this article, you will learn more about assignment sales, why they are used, and how you can benefit from this unique transaction as an investor. This way, you will be able to determine if an assignment sale is right for you.

We at GTA-Homes strive to provide our clients with the knowledge of the pre-construction market so that they can make a more informed choice when it comes to investing in their future.

An assignment sale can be mutually beneficial for both the buyer and the seller.

See all assignment listings, what you'll learn..., what is an assignment sale, an example of an assignment sale, is it worth it to buy an assignment.

• Is it a Good Idea to Sell An Assignment

Assignments FAQ

The Details of an Assignment Sale

Assignment sales is not a new strategy in Canada, particularly assignment sales in Toronto. However, compared with other countries where condos have been around much longer, the process of assigning a condo in Ontario is not always well understood by sellers, buyers, agents, lawyers, and even lenders. Sellers who have been taking the time to learn about assignments have been reaping the rewards by maximizing their profits.

Why do pre-construction assignment sales happen?

There are many reasons why someone might want to sell the rights to their unit before it’s been built. For example, someone may have bought a suite that’s three years away from being completed, but recently had to relocate for a job. This buyer may need to sell their agreement to afford a property in their new city.

Another common reason is that a buyer began the purchase process when they were single but during the pre-construction process they married or are now expecting a child. Suddenly they’ve discovered that the pre-construction one-bedroom suite they bought is not big enough for a growing family.

The “ assignment clause ” in the purchase agreement comes in handy when these things happen. It allows the original buyer to pass the contract onto somebody else without accruing financial penalties.

These types of transactions are common and fully legal, but whether you are the buyer or the seller, it’s important to work with both an experienced realtor and lawyer who know how to protect your interests.

These deals are more complex than a conventional resale and involve three parties: the developer, the assignor and the assignee. It’s a two-stage process that involves both interim occupancy and the final closing.

This is just the basics of an assignment deal. There are more details regarding mortgage rules, and other contract details. Keep reading to learn more! Or you can always reach out to talk with one of our agents. We love to talk condos! This is just a general overview, but each arrangement is unique with its own rules, terms, and conditions.

We advise everybody who is thinking of buying or selling a pre-construction assignment to seek advice from a real estate agent, lawyer and tax accountant. Contacting an agent is important because assignors may have to pay a fair amount of tax on any profits they received from the completed sale.

Most builders allow assignment sales and you will often see these listings on REALTOR.ca. However, there are some rules in the original purchase agreement that must be followed. They are also more complicated than a regular sale because a mortgage cannot be obtained on the closing of the transaction, only once the building has been registered. Other issues such as occupancy, reimbursement of the seller’s deposits and more must be taken into account.

Pre-Construction Purchase

In 2017, John Smith bought a pre-construction condominium unit from ABC Developments for $400,000 with a total down payment of 20%, equalling $80,000. He signed the original Agreement of Purchase and Sale (APS), and the project is set to be completed in 2024.

Original Buyer Needs to Relocate

In 2023, John discovers he will be relocated to a new city for his job. He can't afford to buy a new home while holding onto his pre-construction condo unit.

Original Buyer Becomes an Assignor

Fortunately for John, the assignment clause allows him to sell the contract for his unit before the building is completed and registered! John becomes an assignor.

Assignee Buys the Rights to the Unit

John contacts an experienced pre-construction sales agent who networks on his behalf to find an interested buyer (an assignee). His agent finds Jane Doe, who wants a great deal on a new condo and decides to buy the rights to John's unit. As the assignee, Jane decides to make the purchase and agrees to perform all of the assignor's obligations outlined in the original APS. John has decided to sell the contract to his unit to Jane Doe. Due to the changes in the market, he was able to sell the contract for $500,000.

• Assignment Purchase:
• Assignment Agreement: $500,000
• Original Purchaser (Assignor) = John Smith
• New Purchaser (Assignee) = Jane Doe
• Vendor (Builder) = ABC Developments

Assignment Purchase Price by John Smith to Jane Doe = $180,000, due immediately. This includes a deposit of $80,000 + profit $100,000. The amount and timeframe for this payment can also be negotiated.

Assignee Moves In

In 2024 when the building is complete and ready for interim occupancy, Jane Doe will move into the unit during the occupancy period. At this point she will begin paying occupancy fees to the developer. These fees take the place of mortgage payments and condo fees until the building can be registered.

Interim occupancy happens when the city has designated the property as safe to live in. The building will be officially registered once the municipality does a final inspection. Jane Doe can occupy her suite in the meantime until the building is officially registered.

Assignment Details

When the building is officially registered by the city, the official title transfer takes place between the developer and the new purchaser. Jane Doe can finally register a mortgage and start paying her mortgage payments and condominium fees. Funds required to complete the sale by Jane Doe to the builder = $320,000

Jane Doe now has all the rights to the property, just like any homeowner. Any future re-sale of the property will consist of a regular real estate transaction.

Assignment purchases can actually give you some of the best deals in the GTA condo market because fewer people typically seek out these types of sales. In addition to fewer buyers, many real estate agents aren’t familiar with the structure of an assignment sale and often won’t bother to advertise these listings. Even lawyers may not know the ins and outs of an assignment sale.

The high demand in the resale market can potentially force buyers into bidding wars, which can cause people to overpay for their suite. Buying a contract through assignment gives you the opportunity to avoid excessive competition and often means you pay much less than you would for a resale unit.

The assignment condo market can be mutually beneficial for both the buyer and the seller. The seller can list their unit without having to wait until the building is completed, and the buyer can save time and potentially thousands of dollars.

Another advantage to buying an assignment agreement is that you will get a brand-new unit that automatically comes with the seven-year Tarion Warranty Program. Let’s not forget that you’ll likely move into the unit sooner instead of waiting the usual 3 to 4 years for the building to be completed!

Let’s Recap Some of the Advantages for Buyers:

• Options: More choices when there’s a shortage of listings in the market.
• Less Competition: Fewer people look at these types of listings.
• Peace of Mind: Fewer people looking at these sales means there’s less of a chance for a bidding war. You can avoid bidding wars and paying more than you can afford just to outbid another buyer.
• You Become A VIP: You will likely inherit VIP incentives like the seven-year Tarion Warranty Program and other incentives from the builder such as credits, upgrades, capped developing charges and much more.
• More Choices: Depending on how far along construction is, you may still be able to select your own finishes, colors and upgrades.
• Negotiate: Sellers usually need to sell because they need to drop their equity. This can give you leverage for prices, deposits, and closing dates.
• Brand New Suite: You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract. Oftentimes the occupancy date is just a couple of months away.
• Taxes: You may also benefit from saving on taxes like GST and HST.

We love to chat about the assignment sale market, so don’t wait, give us a call and let’s find you a great deal.

Is It a Good Idea to Sell An Assignment?

Traditionally, owners who wanted to sell their pre-construction units had to wait months or years for the final closing date to officially put their suite up for sale. By this time, they could have already put significant funds into occupancy fees and closing costs. If you find you want to sell your unit before its closing date, assigning it can be a great choice. This can help you save money and avoid paying occupancy fees and closing costs.

Assignments sales is not a new strategy in Canada, but compared to other countries where condos have been around much longer, the process is not always well understood by sellers, buyers, agents, lawyers, and even lenders. Sellers who have been taking the time to learn about assignments have been reaping the rewards by saving time and maximizing their profits.

These transactions are becoming increasingly popular. Think of it as a sort of condo flipping. Sellers can transfer their property rights during or before interim occupancy and avoid paying hefty carrying and closing costs, which helps them get their deposits back.

Most builders allow assignment sales, although they often have certain rules that must be followed. Even with strict rules in place, however, there are options available for you.

Let’s Take a Look at the Advantages for Sellers:

• Insurance Policy: In the event that your situation changes and you no longer need your unit, you are able to sell your assignment and pull out your equity.
• Gain a Profit: In a seller's market, you may be able to sell the rights to your unit at a higher price than you bought it, gaining a profit. This is like 'condo flipping'. In the right real estate environment, assigning your unit can be a lucrative financial move.
• No Carrying Costs: By passing the right to your unit to someone else, you can avoid paying monthly occupancy fees to the developer that can sometimes last up to two years.
• No Closing Costs: You don’t need to take out a mortgage or incur any other closing costs.

Register With GTA-Homes to Learn More

Our team of Platinum Agents is very well-versed in assignment sales and can help you make the most of your investment. Whether you are interested in buying or selling an assignment, we can help you follow the right track for the best possible outcome. There are excellent opportunities to be had now in the GTA. With a Platinum Agent, you can find 'hidden deals' that may not be advertised elsewhere. You can also gain access to eager buyers as a seller and get ahead. Register below and let us connect you with the best advice.

What is an Assignment Sale?

It is the sale of a contract to purchase a pre-construction unit. This means, instead of selling an already built unit, what’s being sold is the contract or right to acquire the property upon completion. The original purchaser (the "assignor") of a property sells their obligations under the original contract to a new purchaser (the "assignee").

The assignee will generally assume all of the assignor's duties and obligations, such as interest payments, taxes, and maintenance fees during interim occupancy. Upon completion, the assignee is granted the title to the real property and will incur all final closing costs.

Can any kind of purchase agreement involving a real estate transaction be assigned?

Under normal circumstances, any purchase agreement can be assigned, providing the agreement doesn’t prohibit it.

Is an Assignment legal?

It is legally permitted unless prohibited in writing in the original agreement of purchase and sale. In some cases, the developer may charge the assignor a fee for this kind of sale.

Is it necessary to get permission from the developer to assign the contract?

That depends. You need to consult your purchase agreement to get the specifics. Generally developers will not permit an assignment sale without their consent, which means you’ll need to consult with them and a legal representative. There have been incidents where an unauthorized assignment sale has resulted in the original agreement being terminated, and the deposit withheld!

Is there a standard legal form for these types of sales?

Yes, there are two: OREA Form 150 Assignment of Agreement of Purchase and Sale Condominium and OREA Form 145 Assignment of Agreement of Purchase and Sale (including applicable schedules.) In most cases, the developer will have their own form as well.

Will either the assignor or assignee’s lawyer services be adequate?

It is essential that the assignor and assignee each retain a lawyer with expertise in this area of real estate.

Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?

Sometimes. Double check with your builder, as it depends on whether they permit advertising.

What happens if the construction, occupancy, closing, or unit transfer date is delayed?

In the event of a delay, the agreement is still valid. This means the assignee has agreed to take on the agreement and all responsibilities associated with it, including delayed construction or occupancy.

What if the assignee doesn't close?

This is no different than any other property sale, meaning the assignor, in most cases, is not released from the obligations under their original purchase agreement. In this situation, both the assignor and assignee will be liable.

What is the cost of assigning an Agreement of Purchase and Sale?

If the developer consents to the arrangement, there will generally be an administration fee and legal fees. These fees will vary. Consult the original purchase agreement and the developer for specific information.

When does the assignor get their money?

This generally depends on the closing date and the terms of the agreement that the assignor and assignee agreed on. Usually the assignor is paid when:

• the assignee takes possession or,
• when the developer approves the process, if applicable or,
• when the assignee obtains legal title

Who gets the interest, if any, payable by the builder on the original deposits?

Unless otherwise specified, the interest is likely to be paid to the assignor.

Who pays the interim occupancy costs?

Once the assignment is finalized, the assignee will typically pay occupancy costs.

What closing fees are payable?

After the condominium is registered, the builder transfers the ownership title to the assignee. The assignee pays the balance to the builder and any amount still owed to the assignor. Some of the costs the assignor may pay include:

• Estimated property taxes for up to 2 years
• Hydro/water/gas meter installation and connection charges (approx. $500–$700 per meter)
• Development charges/levies (potentially thousands of dollars)
• Tarion New Home Warranty (ranging from $600–$1,900. See Tarion website for fee structure)
• Discharge of builder’s mortgages (approx. $200–$300 per mortgage)
• Builder’s lawyer’s Law Society charge (approx. $70)
• Two months of occupancy fees for reserve fund
• Other amounts set out in the Agreement of Purchase and Sale

These costs are typically not financed with a mortgage. The assignee is responsible for the following additional fees:

• Legal fees and disbursements
• Land transfer tax (provincial and municipal)
• GST/HST rebate
• Municipal levies

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Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit

From: Canada Revenue Agency

Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change. For more information about the legislative amendment, refer to  GST/HST Notice 323, Proposed GST/HST Treatment of Assignment Sales .

GST/HST Info Sheet GI-120 July 2011

This info sheet explains how the GST/HST applies to the assignment of a purchase and sale agreement for the construction and sale of a new house.

The term "new house" used in this info sheet refers to a newly constructed or substantially renovated house or condominium unit. A house that has been substantially renovated is generally given the same treatment under the GST/HST as a newly constructed house. Extensive modifications must be made to a previously occupied house in order to meet the definition of a "substantial renovation" for GST/HST purposes. For a full explanation of the factors to consider in deciding if a substantial renovation has taken place, refer to GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate .

In this publication, a house includes a single unit house, a semi detached house, a duplex, a rowhouse unit and a residential condominium unit (condo unit), but does not include a mobile home or floating home.

Where a person enters into a purchase and sale agreement with a builder for the construction and sale of a new house, the person may be entitled to assign their rights and obligations under the agreement to another person (an assignee). Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee.

This publication addresses the situation where

• a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
• the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.

Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.

For GST/HST purposes, the term "builder" is specifically defined and is not limited to a person who physically constructs a house. There are several instances in which an individual or other person is a builder for GST/HST purposes. For more information on persons who are included in the definition of "builder", refer to GST/HST Memorandum 19.2, Residential Real Property .

This info sheet addresses only whether a person is a builder as described in the following paragraph.

Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances

A builder includes a person who acquires an interest in a new house before it has been occupied by an individual as a place of residence or lodging for the primary purpose of selling the house or an interest in the house or leasing the house, other than to an individual who is acquiring the house otherwise than in the course of a business or adventure or concern in the nature of trade. When that person is an individual, the individual must acquire the interest in the course of a business or an adventure or concern in the nature of trade in order to be a builder described by this paragraph.

Even if a person is not a builder as described in the preceding paragraph, the person may be a builder based on one of the other definitions of the term as described in GST/HST Memorandum 19.2.

Assignment of a purchase and sale agreement by a person other than an individual

Where a person other than an individual (e.g., a corporation) is a builder as described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances" and the person assigns a purchase and sale agreement for a new house, the person's sale of the interest in the house is subject to the GST/HST whether the sale takes place in the course of a business, an adventure or concern in the nature of trade, or otherwise.

Assignment of a purchase and sale agreement by an individual

If an individual enters into a purchase and sale agreement for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the sale of the interest in the house (or the house itself) is normally considered to be made in the course of an adventure or concern in the nature of trade or, depending on all of the surrounding circumstances, in the course of a business. If it is established that an individual is selling an interest in a new house in the course of a business or adventure or concern in the nature of trade, the individual is considered to have entered into the purchase and sale agreement for the primary purpose of selling the house or an interest in the house.

Whether the activity of acquiring an interest in a house, as a result of entering into a purchase and sale agreement, is done in the course of a business or an adventure or concern in the nature of trade is a question of fact. For more information on how to determine whether an activity is done in the course of a business or an adventure or concern in the nature of trade, refer to Appendix C of GST/HST Memorandum 19.5, Land and Associated Real Property .

Factors in determining the primary purpose

All of the relevant factors surrounding entering into a purchase and sale agreement should be considered in determining the primary purpose for a person's acquisition of an interest in a new house.

The following factors may indicate that, for GST/HST purposes, a person entered into a purchase and sale agreement for the primary purpose of selling an interest in the new house or the house itself. The factors are not listed in any particular order and there is no intent to weigh one more heavily than another.

• The person offers to sell their interest in the house or takes other actions to attract buyers before, or while, the house is under construction.
• The person finances the purchase of the house by a short-term mortgage, or an open mortgage that can be paid off without penalty, rather than by a long-term or closed mortgage.
• Financing of the house is beyond the person's means and that person is relying on the increased value and saleability of the house, or an interest in the house, in a rising housing market.
• The person is an individual and their stated intention to occupy the house as a place of residence is not supported by the circumstances of the case. For example, an individual has a family of four and enters into a purchase and sale agreement for a one-bedroom condo unit where they are not contemplating any changes in family circumstances.
• The person's pattern of activity is such that their occupancy of the house does not have the qualities or characteristics of being permanent. For example, the person purchases more than one house at or around the same time. This factor may be given extra weight where the person has previously entered into a purchase and sale agreement for purposes of selling the house or an interest in the house. There are no outward indicators to support a contrary primary intention (i.e., an intention contrary to an intention of resale). For example, an individual is selling a condo unit, one or more of the above factors are present, there are no physical actions or evidence that the individual's primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence, and no evidence that the sale of the condo unit was triggered by some unforeseen event.

In order for the acquisition of an interest in a new house to be for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the intention to sell the house or an interest in it, or to lease the house in the manner described in that section, must have existed at the time of acquiring the interest. Nonetheless, the intention at the time of acquisition may be demonstrated over a period of time.

If an individual acquired an interest in the house for the primary purpose of using it as a place of residence, the person is not considered to be a builder of the type described in this info sheet even if, at a later point in time, the person sells the house or an interest in the house. However, the person may still be a builder if the person meets one of the other definitions of that term as described in GST/HST Memorandum 19.2.

The following examples illustrate when a person may or may not be a builder of a new house.

Sarah, Francine, and Angela are roommates renting a three-bedroom house. They entered into a purchase and sale agreement with a builder in January 2010 for a one-bedroom condo unit in a new condominium complex that was to be built. The purchase price under the agreement was $300,000 and the closing date was July 31, 2013.

In March 2011, the fair market value of the new condo unit had increased by 50%. They entertained several offers for the sale of their interest in the condo unit before assigning it to James. No individual had occupied the condo unit as a place of residence or lodging when they sold their interest in the unit. They split the proceeds, which they each used as a down payment to buy their own homes.

As it would not be practical for the three individuals to live in the condo unit together, they considered several offers for their interest in the unit, and there are no indicators to support a contrary intention, Sarah, Francine and Angela are considered to have acquired their interest in the condo unit for the primary purpose of selling the unit or an interest in it. The sale is considered to be made in the course of a business or adventure or concern in the nature of trade. Accordingly, Sarah, Francine, and Angela are all builders of the condo unit for GST/HST purposes. As they are builders of the unit and the sale of their interest in the unit is not exempt, GST/HST applies to the sale of each of their interests.

Pascal and Chantal own a four-bedroom house where they live with their three children. This is the only home they have ever owned and lived in. They have never purchased any other real property.

In June 2009, they entered into a purchase and sale agreement with a builder for a 1-bedroom condo unit in a new high-rise condominium complex that was to be built. The purchase price under the agreement was $275,000 and the closing date was June 30, 2010. In May 2010, they sold their interest in the new condo unit for $400,000 before it had been occupied by any individual as a place of residence or lodging. They used the sale proceeds to build an addition to their current home.

Although Pascal and Chantal have no history of buying and selling real property, it would not be practical for their family of five to occupy the condo unit as their place of residence. Lacking evidence to support a contrary intention, their primary purpose in acquiring the interest in the condo unit is considered to be for the purpose of selling the condo unit or an interest in it in the course of a business or an adventure or concern in the nature of trade. Accordingly, they are builders of the new condo unit for GST/HST purposes. As the sale of their interest in the unit is not exempt, GST/HST applies to the sale of their interest.

Eric and Gina owned a 3-bedroom house where they lived with their 3 children. They entered into a purchase and sale agreement with a builder in October 2010 to purchase a new 4-bedroom house that was to be built. They intended to use the new house as their primary place of residence as it was located much closer to the children's school and to Eric and Gina's workplaces and had more space. The closing date is July 31, 2011.

Eric and Gina sold their current home in January 2011 and moved into a rented home they planned to live in until their new house was ready. However, in June 2011, Gina's mother became ill and moved in with them as she was no longer able to live on her own.

Eric and Gina decided that the new house would no longer be large enough and that they would now need a house with a granny suite. They sold their interest in the new 4-bedroom house so that they could buy a bigger home that would suit their changed needs.

Eric and Gina's sale of their original home and temporary move to a rented house during the construction of the new home and their choice to purchase a home located closer to school and work support that their intention in acquiring the interest in the new house was to use the house as their primary place of residence. Given this, and the fact that their only reason for selling the interest was due to a change in personal circumstance (i.e., the new house would no longer accommodate their family's needs), they are not considered to have acquired the interest in the house for the primary purpose of selling it. Accordingly, they are not builders of the new house for GST/HST purposes and the sale of their interest in the house is exempt.

Cindy entered into a purchase and sale agreement with a builder in November 2010 for a new house that was to be built. She intended to use the house as her primary place of residence. Her new home would be located within walking distance from her workplace and would be closer to her family than the apartment she is currently renting. The closing date for the purchase is September 30, 2011.

In July 2011, Cindy's employer announced that it was relocating to another city located three hours away. To keep her current job, Cindy had to move to that city. She sold her interest in the house to John.

Since Cindy had intended to use the house as her primary place of residence and her only reason for selling her interest in the house was due to work relocation, she did not acquire the interest in the house for the primary purpose of selling it. Therefore she is not a builder of the house for GST/HST purposes and the sale of her interest in the house is exempt.

Assignment fees

The consideration charged for the sale of an interest in a house generally includes amounts that a person paid to a builder (e.g., a deposit) and that the person wants to recover when assigning their interest in the house. The sale price for the interest may also include a profit, i.e., an amount over and above amounts the person had paid to the builder. If a person's sale of their interest to an assignee purchaser is taxable, the total amount payable for the sale of the interest is subject to GST/HST, including any amount the person paid as a deposit to the builder, whether or not such an amount is separately identified.

A first purchaser enters into a purchase and sale agreement for a new house with a builder (Builder A) and pays a deposit of $10,000 at that time. The first purchaser does not make any further payments to Builder A. The first purchaser subsequently assigns the agreement to an assignee purchaser for $15,000. If the sale of the interest in the house from the first purchaser to the assignee purchaser is subject to GST/HST, tax applies to the full $15,000. This is the case even if the assignment agreement identifies that the $10,000 is a recovery of the deposit that the first purchaser paid to Builder A.

The assignment of a purchase and sale agreement for a new house may be subject to the approval of the builder with whom the first purchaser originally entered into the agreement to construct and sell the new house. The agreement may list conditions related to the first purchaser's right to assign the agreement to an assignee purchaser and, in many cases, the builder charges a fee to the first purchaser for the assignment of the agreement to another person.

The fee charged by the builder in such circumstances is generally subject to the GST/HST.

Eligibility for a GST/HST new housing rebate and provincial new housing rebate (where applicable) where a purchase and sale agreement is assigned

The GST/HST new housing rebate, and where applicable, a provincial new housing rebate, may be available for a new house purchased from a builder and for owner-built new housing. Guide RC4028, GST/HST New Housing Rebate , sets out the eligibility criteria for both types of GST/HST new housing rebates and provincial new housing rebates.

If the first purchaser (the assignor) makes a taxable sale of an interest in a house, i.e., the first purchaser is a builder and assigns the purchase and sale agreement to an assignee purchaser, the first purchaser would not be eligible for either a GST/HST new housing rebate or provincial new housing rebate as they did not acquire the house for use as their primary place of residence. Even if the sale of the interest in the house by the first purchaser is not subject to GST/HST (i.e., in situations where the first purchaser is not a builder of the house), the first purchaser would generally not be eligible for either a GST/HST new housing rebate or a provincial new housing rebate as the conditions for claiming the rebates are not met (e.g., ownership of the house would not transfer to the first purchaser, but to the assignee purchaser).

The assignee purchaser, if an individual, may be eligible for a GST/HST new housing rebate, and where applicable a provincial new housing rebate, where the assignee purchaser receives an assignment of a purchase and sale agreement for a new house. The assignee purchaser would have to meet the eligibility conditions for the rebates as set out in Guide RC4028.

Where a purchase and sale agreement for a new house is assigned, there may be two builders of the house – the original builder (Builder A) and the first purchaser (the assignor). If that is the case, an assignee purchaser would generally have to pay the GST/HST to Builder A for the purchase of the new house and to the first purchaser for the purchase of the interest in the new house.

Claiming a GST/HST new housing rebate when there is more than one builder

In some cases, the builder of a new house pays or credits the amount of the GST/HST new housing rebate, and where applicable, a provincial new housing rebate, to the purchaser of the house. In this case, the builder credits the amount of the new housing rebates to the purchaser by reducing the total amount payable for the purchase of the house by the amount of the expected rebates.

Where this happens, the purchaser and the builder have to sign Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder , and the builder has to send the form to the Canada Revenue Agency (CRA). As the purchaser receives the amount of the rebate from the builder, the builder may claim the amount as a credit against its net tax when it files its GST/HST return.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house.

In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

This info sheet does not replace the law found in the Excise Tax Act (the Act) and its regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA GST/HST rulings office for additional information. A ruling should be requested for certainty in respect of any particular GST/HST matter. Pamphlet RC4405, GST/HST Rulings – Experts in GST/HST Legislation explains how to obtain a ruling and lists the GST/HST rulings offices. If you wish to make a technical enquiry on the GST/HST by telephone, please call 1-800-959-8287.

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, you may refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .

If you are located in Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please contact Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec Web site to obtain general information.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech .

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What Is a Special Assessment? Condo and Co-op Buyers Beware

As vice president of my own condominium’s board of directors, I can assure you no one likes getting wind of a special assessment—which, put plainly, is a charge that homeowners must pay to fund a renovation on the property or to replenish an underfunded reserve.

This added fee can crop up for owners of a condo , co-op , or home belonging to a homeowner’s association (HOA) . And even just uttering the words “special assessment” makes my neighbors cringe! Let’s take a look at why.

What does it mean?

Most condo or HOA homeowners pay monthly fees . These fees typically range from $100 to $1,000 per month (or more!), but they can vary greatly based on what they cover. Some fees only cover exterior maintenance, while others are more comprehensive, and may also cover utilities (water, trash, sewer) and even security guards.

Typically, a portion of the condo fees is allocated to the association’s reserve fund—essentially a rainy-day fund for larger, occasional expenses such as paving, re-roofing, replacing water heaters, exterior painting, or hallway flooring.

Yet unexpected expenses can also occur. Every once in a while, something big gives out, like a roof or an elevator, and homeowners insurance may not cover the costs.

If your association’s reserve fund is low or depleted when disaster strikes, you and your fellow homeowners will have to pay a special assessment. In some instances, assessments are tacked on to the monthly condo fees in small amounts until the debt is paid off; in other cases, the assessment is a one-time charge that must be paid by each homeowner as a lump sum.

If you live in a well-run condo association or HOA, your community should have enough cash set aside in reserve funds to cover emergency repairs. But, alas, not every condo board is managed well.

Naturally, this raises the question: How much money belongs in the reserve fund? Unfortunately, there’s no magic number. It can range significantly depending on a number of factors, such as the number of homes in the community and their ages.

The good news? There is a formula, so to speak.

Many condo boards order an annual or biannual “reserve analysis study,” where a qualified engineer performs an architectural and engineering study of the entire complex—including a projection of the remaining life of items like the roof, boiler, or elevator—and reports back to the board with a recommendation on how large the community’s reserve fund should be. Though it’s not an exact science, this professional estimate is generally a good benchmark.

How much can it be?

The fee depends on the cost of the repairs. For example, let’s say your condo building’s roof caves in and the board immediately needs $30,000 to install a new roof. If there are 40 unit owners, each owner would be required to pay about $750. Often the precise fee will vary, depending on the size of your condo or house. Generally, the larger your property is, the higher your portion of the assessment will be.

What’s my likelihood of receiving a special assessment?

If you’re searching for clues for whether a special assessment is in your future, you’ll want to review your association’s financial statements. These documents which will show you how much money is currently in the reserve fund. If the fund is relatively low, you may be at risk of a special assessment in the event of an emergency expense.

Also, take a look at the governing documents of your development. These are called “restrictive covenants” —also known as the Declaration of Covenants, Conditions, Restrictions, and Easements (CC&Rs), and they usually outline procedures that the association must follow in order to levy a special assessment. In some cases, the entire community (not just the board of directors) votes before there’s an assessment.

In addition, some states have laws that restrict the amount of money an HOA can collect in special assessments in a calendar year.

Can I protest a special assessment?

Technically, you can protest a special assessment by filing a complaint with your board . However, if you don’t have buy-in from your fellow homeowners, your request is likely to be denied, in which case you’ll have to pay the fee. Also, bear in mind that rejection rights usually don’t apply to assessments for projects that are necessary for the health and safety of residents.

Your best odds of a successful outcome is when there’s a special assessment on the table for an unnecessary project, like adding a swimming pool or a fitness center, in which case, other unit owners may have your back in helping you revoke the assessment.

The bottom line

Special assessments are an inherent part of being a homeowner in a condo or HOA. No one likes them, but sometimes they’re necessary—and you just have to cope with the circumstances.

Daniel Bortz has written for the New York Times, Washington Post, Money magazine, Consumer Reports, Entrepreneur magazine, and more. He is also a Realtor in Virginia.

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