If you’re buying or selling pre-construction real estate in Ontario, you may come across the term assignment sale. Assignment sales are increasingly common in the Greater Toronto Area (GTA), especially with the high volume of condo developments. While they can be profitable, these transactions also come with legal and financial risks. That’s why working with an experienced Ontario real estate lawyer is essential.
What Is an Assignment Sale?
An assignment sale allows the original buyer of a pre-construction property (called the assignor) to sell their rights and obligations under the original purchase agreement to a new buyer (the assignee) before the property is completed and registered.
This means the assignor is not selling the actual property (since they don’t yet own it), but rather assigning their contract with the builder to someone else. Once the unit is built and registered, the assignee takes title and closes directly with the builder.
Why Are Assignment Sales Popular?
Assignment sales offer flexibility. Assignors may need to exit due to financial or personal reasons, or they may simply want to profit from appreciation in the market. For buyers, assignment purchases are an opportunity to secure a unit in a sold-out building or avoid long wait times for new project launches.
Legal Considerations and Builder Approval
In most cases, the builder must approve the assignment, and there may be a fee involved. Some builders restrict when assignments can take place—often requiring the unit to be near completion. These details are usually outlined in the original Agreement of Purchase and Sale.
Buyers and sellers must also be aware of tax implications, including HST on assignment profits and potential capital gains taxes. These can vary depending on whether the original buyer intended to live in the unit or treat it as an investment.
How a Real Estate Lawyer Can Help
Assignment sales involve more complexity than traditional property transactions. A real estate lawyer can:
- Review and negotiate the assignment agreement
- Ensure compliance with the builder’s terms
- Advise on deposit transfers, HST obligations, and closing costs
- Protect your legal interests from start to finish
Whether you are assigning your purchase or buying through assignment, legal advice is crucial to avoid hidden risks and ensure a smooth closing.