An assignment is a legal sales transaction in which the assignor (original purchaser) of the property transfers their rights and obligations under the contract to the assignee (new purchaser). In simple terms, the assignee pays the assignor for the right to purchase the property.
The assignment is based on the original agreement of purchase and sale between the original purchaser and the developer. The assignment happens before the property is completed.
The assignee takes on the obligations and duties of the assignor under that agreement. The original agreement of purchase and sale sets out these duties and obligations, such as included items, deposits, required disclosure statements and the completion date. The assignor usually remains responsible to the developer if the assignee does not complete the purchase, unless the developer agrees to release the assignor.
The assignee is granted title to the property once it is completed and the purchase closes. Any assignment fees charged by the developer are usually paid by the original purchaser, unless the parties agree otherwise. Since May 7, 2022, GST/HST applies to all assignment sales of newly built homes and condominium units, so ask about the tax before you agree on a price.
The developer remains the legal owner of the property until title is transferred on completion of the purchase. For most assignment transactions, the developer needs to give written consent under the agreement.
How Does It Work?
Before project completion, many investors end up selling their interest in the property they bought from the builder. An assignment occurs when the purchaser-investor’s interest in the builder’s agreement of purchase and sale is transferred to a new buyer, called the assignee.
The builder’s written consent is usually required before the purchaser-investor can make an assignment. Many builders’ agreements also restrict or prohibit assignment, or charge a fee for it.
Whether you are moving into the property or purchasing an investment property, it is advisable to get the agreement reviewed by a real estate lawyer so that you understand your options and can request an amendment to the agreement of purchase and sale to allow for future assignments.