Simply put, an assignment sale is the sale – or an “assignment” of a contract to purchase a pre-construction residential unit. An assignment sale is applied to a pre-construction residence that has not been built or registered yet, so no one can take ownership of the unit itself. Only the contract can be sold.
When one purchases a pre-construction residential unit, an assignment clause/right may be indicated.
For those who are curious about the opportunity’s assignments provide, here is a quick FAQ that can help steer all parties involved in the right direction when contemplating selling before closing on a pre-construction residence.
Q: What is an Assignment?
A: An Assignment is when the initial Buyer (Assignor) allows a New Buyer (Assignee) to take over an Agreement of Purchase and Sale together with all rights and obligations per the contract prior to the completion date.
Q: Are all Agreements of Purchase and Sale Assignable?
A: Unless otherwise stated most pre- construction Agreements of Purchase and Sale are Assignable.
Q: Do I need the Builders consent to Assign my Agreement?
A: Most new construction Agreements of Purchase and Sale require Builder’s permission to do so. The Initial Buyer in hopes of becoming an Assignor must also exercise extra care when considering doing so since there may be time restrictions, Assignment Fees and Builder’s legal fees attributed subject to the Assignment.
Q: If I elect to Assign my Agreement, who will handle the Assignment process?
A: In most cases either the Initial Buyers Realtor, the Builder and/or solicitor would provide the necessary paperwork to be completed. It is always advisable to seek legal council to review any and all documentation prior to signing to ensure that all parties rights are well represented.
Q: What happens to my deposit that I initially paid to the builder?
A: At the time of assignment the New Buyer (Assignee), will be required to reimburse the Initial Buyer (Assignor) for any deposits paid. Following the completion of the Assignment any and all deposits paid initially, that are held in trust with the Builder/ or Solicitor now become part of the rights and obligations of the New Buyer (Assignee).
Q: Can I assign my Agreement of Purchase and Sale for more money?
A: Yes, the Assignment can be subject to a monetary gain, paid either at the time of assignment or on completion of the Agreement of Purchase and Sale being assigned. Please keep in mind that any gains may be subject to HST, and it is best to seek legal advice to ensure both parties rights are well represented.
Q: When do I collect my gain and who pays the HST?
A: It is recommended that the gain together with any HST and initial deposits, be payable by the New Buyer (Assignee) to the Initial Buyer (Assignor) at the time of assignment. However, the Assignee and Assignor may elect to exchange the gain and any applicable HST at the time of completion of the Agreement of Purchase and Sale (upon Final Closing).
Q: Following the Assignment, am I still responsible for the Purchase?
A: All parties involved will want to pay close attention to this and require the solicitor to review the Builder’s assignment terms and conditions. In most cases, in the event of default by the New Buyer (Assignee), the Initial Buyer (Assignor) will be required to complete the transaction per the terms and conditions of the Agreement of Purchase and Sale.
While these questions and answers are merely a guideline for understanding the basics of Assignments, the writer and publisher caution the reader and strongly advise that the reader seeks proper legal advice to ensure their rights are well represented.