What is an assignment sale related to pre-construction?
An assignment sale is a process when the original buyer of a pre-construction property transfers their purchase agreement to a new buyer before the completion of construction of property. The assignee (new buyer) steps into the assignor’s (original buyer) role, taking on the rights and obligations to close the deal with the developer.
What are the reasons people sell pre-construction real estate as assignments?
There could be various reasons behind it such as a new job, family growth, or financial shifts—often prompt assignors to sell. Investors may also assign to lock in profits early, avoiding closing costs or mortgage commitments, especially if the property’s value has risen since purchase.
Is an assignment sale legal?
Yes, assignment sales are legal in most regions, such as Ontario, Canada, provided the original purchase agreement allows it. Developers often include an assignment clause, though some restrict it until a certain percentage of the project is sold or nearing completion.
Do I need the developer’s permission to assign?
Typically, yes. Developers may require approval and charge an assignment fee (e.g., $500 to $20,000) to process the transfer. Check your agreement—some builders ban assignments if they still have unsold inventory.
What costs are involved for the assignor?
The assignor might face real estate commissions (often 4-5% of the assignment price, handled privately as assignments aren’t usually on MLS), legal fees, and the developer’s assignment fee. If selling at a loss, they may need to cover the gap. HST (sales tax) could apply on profits, depending on intent (e.g., investment vs. primary residence).
What costs does the assignee pay?
The assignee pays the assignment price (original price plus any profit or discount), all deposits made by the assignor, and closing costs when the property is completed (e.g., land transfer taxes, development levies). They may also need cash for the full deposit amount upfront, as financing can be tricky until closing.
How does HST work in assignment sales?
In Canada, post-May 2022 rules require HST on assignment profits, regardless of intent, unless the assignee claims it as a primary residence and qualifies for a rebate (e.g., up to $24,000). Assignors must remit HST on the profit portion, while assignees might reclaim it later via the CRA.
Can I assign any pre-construction property?
Not always. The original agreement must include an incentive of assignment clause, and the developer must agree. Many of the low rise developers doesn’t allow assignment sale, some restrict assignments until the project is near occupancy or fully sold.
What are the benefits for the assignee?
Assignees get a new property without waiting years for construction, often with less competition than resale markets. They might also negotiate a deal if the assignor is desperate to exit.
What are the risks for the assignor?
If the market dips, they could sell at a loss or fail to find a buyer, forcing them to close on the property or face legal action from the developer for defaulting. Deposits could be lost if the developer cancels the project (a rare but possible risk).
How do I find assignment sales?
They’re rarely on public platforms like MLS. Connect with real estate agents specializing in pre-construction or check platforms like Assign Circle or Condos.ca for private listings.
Should I use a lawyer or realtor?
Yes, both. A realtor experienced in assignments can find deals and negotiate, while a lawyer ensures the contract transfer is airtight, protecting you from surprises like hidden fees or developer disputes.
If you’ve got a specific scenario in mind, feel free to contact us
