How Assignment Clause work?

An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller.

In other simple words, an assignment clause allows the buyer of a condo/home to sell the place before they take possession of it.

In Ontario, assignments are more common in pre-construction condos and pre-built homes, but they are possible on any type of trade.

Assignments sale transactions are very common during the construction stage of new developments by allowing the original purchaser to resell their unit before the sale is completed for the property. Since units is under pre-construction are purchased prior to occupancy, sellers often choose to assign their units before they occupy.

Assignment as Selling In most cases the developers will have certain rules that must be followed. For example, some builders/developers may charge up-to $5,000 as administration fee must be paid, 90% of the building must be sold out, the floor plan that you have purchased must be sold out, it cannot be advertised on MLS, and the builder must give permission for assignments to take place. Once all the criteria have been met, it is recommended that you speak to your lawyer to assist you with the assignment.

Assignment as Buying More common, when purchasing an Assignment Agreement is that the assignor is indeed allowed to assign his condo/home. There can be serious complications from the builder if units are assigned without the builder’s permission. The process of purchasing an assignment is quite different than your standard real estate transaction as you are purchasing a contract from the original owner of that contract and assuming all their rights and obligations. So it’s better you get the proper legal advise from your lawyer in order to buy assignment.

Example of how an Assignment works:

Original Purchase Agreement Amount: $450,000

20% Deposit: $90,000

Now New Purchased Price: $540,000

Now difference would be: $180,000 (($90,000 = $450,000 - $540,000) + $90,000 (20% deposit))

This amount is paid to the original purchaser of the Agreement of Purchase and Sale Once the assignment fee is paid to the original purchaser, the new owner is obligated to pay the original purchase price of the property as per the terms of the original Agreement of Purchase and Sale to the developer. When dealing with assignments, it is extremely important for both the assignor and assignee to seek legal advice as these transactions can sometimes become very challenging. When handled correctly, assignment can have a mutual benefit to both parties involved.

We advises anyone participating in an assignment to seek the advice of a tax specialist. Generally, assignors can expect to pay tax on any profits they realized from the assignment. Land transfer taxes are paid by the assignee, as they are only due when the sale closes.



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