In real estate, an assignment sale is when a buyer assigns their interest and rights to buy a property to someone else. This often occurs with pre-construction condo assignments or homes before closing. In Toronto, we observe assignment sales primarily in new builds where the original buyer is looking to exit before the final purchase. These deals come with unique legal considerations and documentation. Our deep knowledge of these types of deals allows us to guide clients through many pitfalls. Next, we unpack the key things that both buyers and sellers should be aware of.
What Exactly Is An Assignment Sale?
1. The Basic Definition Explained Simply
Simply put, an assignment sale takes place when the original buyer, referred to as the assignor, sells their right to purchase a property. This can take place even before they finish buying the property. The new buyer, called the assignee, simply takes over the contract and assumes the original terms. The procedure requires a properly executed, written assignment agreement. This is most commonly seen with pre-construction condos or new housing developments. Let’s say you bought a downtown Toronto condo that will be completed in two years. If their life situation changes, they can just as quickly assign their contract to someone who would love to take possession sooner.
2. Assignor, Assignee, Developer: Who's Who?
The assignor is the original purchaser. The assignee, as the new buyer, and the developer, acting as the builder or seller of the property, are key parties in the overall assignment sale transaction. Each party has a distinct role that they play. The assignor needs to follow all contracting guidelines. At this point, the assignee must make sure that they qualify with the developer, who still has to approve the transfer. Effective communication is essential. Disputes often arise regarding the deposit, assignment fee, or
closing costs.
3. Why Sellers Choose Assignment Sales
Assignment sales appeal to sellers who want flexibility. It allows for an easy out from a transaction if their financial situation wanes or they simply wish to unlock liquidity. In a market that’s cooling down, assignment sales may help recoup some losses. For sellers, it’s often an opportunity to skip the entire resale process and real estate commission fees.
4. How It Differs From Regular Resale
In a typical resale situation, it’s the original buyer who takes title. The assignee closes directly with the developer, not through the original buyer. Sometimes this translates into a quicker turnaround, but the legal and financial risk is not the same. There are specific conditions, fees and approval steps associated with assignment sales.
5. Common Scenarios for Assignments
Assignment sales are beneficial for buyers who experience unexpected job relocations, need to relocate for personal reasons, or experience sudden life circumstances that require a change. Investors leverage assignments to cash out when values increase before closing. Developers may push assignments to ensure a project stays on track.
Why Consider An Assignment Sale?
Assignment sales provide distinct benefits that make them especially appealing in Toronto’s go-go real estate market. With more than 25 years of real world experience and an error free title record, this is why we see assignment sales as a powerful opportunity in the marketplace for original buyers and new buyers alike. These deals are especially useful when life changes - like a new job, a growing family, or unexpected financial shifts - make the original purchase no longer fit. In Toronto, where pre-construction condos can take years to finish, an assignment sale lets people transfer their deal before closing and avoid complications.
Benefits for the Original Buyer (Assignor)
If you are the one selling your contract, assignment sales allow you to recoup your deposit. Depending on your local market conditions, you may even be able to turn a profit. It’s not uncommon for our clients to opt for this route in order to get liquidity fast. That’s particularly important when they face unexpected costs or cannot afford to wait decades for a project to complete. Assignment sales limit losses in the event of a market downturn or failed financing. Rather than risking penalties from the builder or developer, the assignor can transfer their rights and responsibilities to someone else. This increased flexibility provides many more opportunities to negotiate a deal that is mutually beneficial. You can negotiate terms such as price changes and closing timelines, plus do all of this without the bureaucratic hassle of a typical sale.
Perks for the New Buyer (Assignee)
Often, the new buyer is taking on a property that’s been priced on the basis of values from several years ago. They may even discover it listed at under market value. New buyers have benefited from the original buyer’s efforts to negotiate higher upgrades or lower costs. They have profited much more than if they had bought their properties today. Assignment sales allow new buyers to purchase units in very popular projects that have completely sold out. Whether you’re looking to relocate or invest, this can provide you with faster access to a cash flow. Besides the cash, it gives you another benefit - a new place to live. In some cases the property is more or less complete - so there’s not as much time to wait or as much risk associated.
Market Conditions Favoring Assignments
Assignment sales do especially well in markets where there’s intense demand with limited supply - which we’re all too familiar with here in Toronto. With prices climbing and little stock available, assignments are appealing for assignors and assignees alike. Interest rate hikes or tighter lending on new builds or other developer policies can further incentivize buyers to pursue an assignment route. We monitor these trends very closely to ensure that we can position our clients to capitalize on the most advantageous timing to meet their goals.
Flexibility Compared to Traditional Deals
Flexibility is one key feature that makes assignment sales so unique. They can close sooner or later, based on everyone’s needs. They can be flexible to life-changing events. Unlike traditional deals, there is minimal pressure on the seller to stage a home or deal with frequent showings. The process is just generally less public and the terms more easily customized. For buyers and sellers who find themselves unprepared due to abrupt market changes, this flexibility is a powerful benefit.
Navigating the Assignment Process Step-by-Step
Assignment sales in the Toronto real estate market add an interesting twist to the overall complexity. These arrangements enable us to be able to assign the rights and obligations of the APS. We assign these from the initial purchaser (assignor) to a secondary purchaser (assignee). The entire process is tedious; every move counts towards an easy, legal, and equitable closing. When these steps are taken, we are doing our part to protect buyers and sellers from hidden dangers. In addition, we keep all stakeholders in the loop with detailed documentation at each step. Knowing the process puts us in control, whether we’re seeking flexibility, profit, or an entry point into a hard-to-access project.
Review Your Original Purchase Agreement First
As a rule, we begin by reviewing the original purchase agreement. This one document controls the assignment rules. Some developers have no assignments, while other developers have fees or time limits to assignment. We review for assignment clauses, review deposit schedule and identify any limitations. If the agreement does nothing or fails to clearly address, this indicates an area ripe for negotiation. We get started on our end by marking up terms that the client should negotiate or otherwise clarify before moving forward.
Secure the Developer's Go-Ahead (Crucial!)
Sales assignments in new construction almost always require the developer’s written consent. We are required to make a formal request, submit supporting documentation, and pay any applicable assignment fee. Fail to do this and the sale could be rendered null and void. Developers can have a hard no policy or cap on number of assignments. Understanding their position early avoids a lot of heartache down the road.
Find Your Buyer or Seller
To identify assignment sellers, we draw from real estate community networks, online marketplaces, and referral-based connections. Many buyers are drawn to assignments because properties can be cheaper than market value, or they want a unit in a sold-out building. We thoroughly vet serious buyers to verify legitimacy, motivation, and financial capacity. Clear, honest communication about the deal’s value helps attract serious candidates.
Negotiate the Assignment Terms Fairly
Core terms - price, deposit, closing dates, and fees - get negotiated in the open. We’re very clear about everything so there’s no miscommunication and no fighting later. It’s often unclear how or when payment is due, or there are credentialing or other hidden fees, so we write out the terms in layman’s terms. Written agreements allow for less wiggle room in interpretation.
Draft the Assignment Agreement Carefully
A carefully drafted assignment agreement is our best line of defense. Parties’ names, deposit information, buyer responsibilities, and developer consents are just some of the items we have all parties sign. Imprecise or omitted language may result in litigation or forfeited deposits. We strongly advise engaging a
real estate lawyer in the process to make sure all legal bases are covered.
Handle Deposits and Payments Securely
The new buyer will usually be the assignor’s deposit amount - sometimes 20%. We don’t take deposits; we use trust accounts, we give receipts, and we log every single payment received. Payment timelines are established in black and white so there’s no misunderstanding on either side as to what is expected, when, and for how much.
Understand the Final Closing Process
Completing an assignment sale closing is not much different than a typical closing, with the addition of additional paperwork. We sign off on all documents - developer approval, assignment agreement, APS and records of payment are received. Communication and coordination between all parties - especially lenders and closing attorneys - is critical to avoiding last-minute delays. If challenges arise, such as last-minute changes or legal questions, we address them fast to keep the deal on track.
Key Legal Points to Understand
For assignment sales in Toronto real estate, there are specific legal processes and pitfalls that buyers and sellers must navigate. We’ve learned that even small oversights in such transactions can result in millions of dollars lost, or worse - litigation. We value honest and forthright outside counsel. Our easy-to-use online service makes it simple to learn your rights and responsibilities right from the start. Ontario law allows assignment sales. To be clear, each city can and often does have its own unique rules, so it’s important to get the facts straight.
Critical Contract Clauses to Watch
The backbone of any assignment sale are the terms in the Agreement of Purchase and Sale (APS). In Ontario, an assignment is only possible if the original APS contains an assignment clause. This clause should give the seller as well as the buyer the ability to assign the contract. This is something we carefully vet before proceeding. Pay particular attention to the assignment fee. Further, check what the deposit transfer rules are, and what all has to happen for the builder’s (or seller’s) approval. Some contracts even go so far as to require that the builder provide such written approval. They further restrict the ways and times the contract may be assigned. Imprecise or absent language leaves both parties vulnerable. That’s why we go line by line through clauses and rebuttals, precisely defining each responsibility and timeline.
Know Your Legal Obligations
Both assignor and assignee now have defined legal duties. The assignee must assume in writing all rights and obligations under the original APS. If one side drops the ball, they both face dire consequences. The failure to timely pay a deposit or failure to fulfill a condition may expose the party to liability for lost profits. In Toronto, if you skip some of these important legal steps, you risk either losing your deposit or being sued. We always maintain clear lines of communication, ensuring that all parties are aware of what’s needed and when.
Why Independent Legal Advice Matters
Assignment sales are a trickier animal than run of the mill transactions. That’s why we always strongly recommend clients to seek independent legal advice. Our job is to identify risks, advise you on alternatives, and advocate for provisions that best safeguard you. Experienced legal counsel can help you avoid lurking tax traps. This extends to taxes on capital gains or business income, which are sometimes subject to tax rates of up to 53% for individuals. We help you navigate through complex negotiations and protect your interests when contract disputes arise.
Recent Rule Changes Affecting Assignments
Rather, laws governing assignments are constantly evolving. Recently, these have been expanded with additional disclosure rules, builder pre-approval requirements, and tax reporting requirements. In Toronto, profits from assignments are almost always taxed as business income. They are only taxed as capital gains if you qualify for certain exceptions. We monitor changes in the rules so you’re never surprised by them. That way, we make sure you’re always adapting and staying every assignment legal and above board.
Financial Realities: Costs and Taxes
As assignment sales in Toronto and throughout Ontario have become more common, they present unique financial realities. In these deals, developers take over a pre-construction purchase agreement. The original buyer, or assignor, transfers the contract to a different buyer, or assignee. Assignment sales offer greater flexibility and opportunities. They’re accompanied by a number of costs and tax liabilities that are a new burden on both parties that require foresight and planning. We’re tired of hearing about fixed closing costs and a perfect title record. Our promise to be transparent and clear is very important as you learn to walk through these complicated deals. Our decades of experience have taught us that budgeting for every conceivable cost is key. It’s not only the cost, though. As you navigate these financial realities, it’s important to know what’s dollar at stake, builder fee to government tax.
Calculate Your Potential Profit (or Loss)
As a starting point, we always counsel our client to begin with a straightforward profit or loss calculation. That’s why it’s important to consider more than just the gap between your buy and sell price. Market fluctuations, commissioning fees, litigation expenses, and developer fees are all factors that come into play. If the market has cooled since you bought, you’ll be lucky to break even if you’re not losing money already. It can happen even if you make a substantial upfront payment. Checking out some recent comps can give you an idea of what to realistically expect here. We spend a good amount of time walking our clients through these numbers, using actual case studies from the GTA.
Understand HST on Assignment Sales
Learn about HST on assignment sales. HST may apply to the full assignment value, not just your earnings portion. It’s especially important for both assignors and assignees to understand who’s responsible for this tax, as many new builds find assignees assigned. Understanding and factoring HST into your calculations is not optional. We suggest speaking to a tax professional or our team early, as HST obligations vary by situation and can dramatically affect your take-home amount.
Factor In Capital Gains Tax
Keep in mind the capital gains tax. Capital gains tax can be generated by assignment sales, particularly when an investment property is being sold. With recent federal tax rule changes, it is more important than ever to examine your exposure. Determining your capital gain involves calculating your adjusted cost base, selling price and any eligible expenses. We advise that you check your tax plan prior to signing any agreements, so you’re not caught off guard come tax season.
Beware the Anti-Flipping Tax Rules
The intention of the government’s anti-flipping rules is to prevent short-term, easy-money transactions. If you complete an assignment of a contract within a narrow time frame, you could be subject to even more taxes. Understanding the criteria - such as minimum holding period or purpose of the purchase - will allow you to protect yourself from unwarranted penalties. Our in-house team works with you to structure transactions to remain both compliant and maximize desired outcomes.
Account for Builder Fees and Costs
Builder fees may be for administration, legal review, or a builder levy. Because these tend to come out very late in the process, we try to flag them early. Having a handle on these and negotiating them with builder and budgeting for them in advance is critical. We regularly encounter clients who have not fully accounted for these costs, which can wipe out profits if they aren’t planned for.
Navigate Assignee Financing Challenges
Assignees encounter challenges obtaining mortgage financing on assignments. Lenders will expect higher down payments - typically at least 20% for new builds. As lender policies vary widely, we counsel our clients to seek definitive pre-approvals with clear lines of communication established between banks. Knowing these requirements upfront will help ensure that you close your deal and avoid losing your assigned deal and creating unnecessary stress.
Common Risks and How to Mitigate
Assignment sales in Toronto real estate are complicated with complex legal procedures and rapidly changing market variables. Clients are sometimes shocked to learn just how many moving pieces there are to a given transaction. It matters to developers, original purchasers, new purchasers, lenders, and even the Canada Revenue Agency. With thoughtful strategy, close collaboration, and our proven expertise, we’re able to equip clients to sidestep the vast majority of challenges.
Risk of Developer Refusal
One of the most frequent hurdles encountered is the risk that a developer will refuse to approve the assignment sale. Developers in the greater Toronto area (GTA) can be quite draconian. Some only allow one assignment per unit, some impose exorbitant fees, and others still prohibit assignments entirely. Our first move is to always look at the original agreement of purchase and sale. Doing so allows us to identify assignment clauses, understand which uses are permissible, and prepare for any unusual developer directives. We try to get in the habit of contacting developer reps upfront, receiving written responses, and documenting each approval. Should a refusal occur, at this point we do hardball negotiations with the developer. We look at other options, such as closing in the initial purchaser’s name and later selling to the final buyer.
Issues with Assignee Financing Approval
Financing is the other major risk. Lenders view assignment sales differently than traditional home sales. This is where many assignees get into hot water - either because their paperwork isn’t in order or the lender denies assignment transactions. We partner with experienced mortgage brokers familiar with the local market. To combat this, we assist our clients in preparing accurate, concise documentation and maintain a running checklist for lender stipulations. Dealing with financing issues from the outset - well before an assignment offer becomes firm - avoids a world of future pain.
Dealing with Market Value Changes
Toronto’s market is extremely quick. If values drop between the original deal and the assignment, an assignee may end up overpaying, or a lender might lower their loan amount. We advise clients on the best ways to utilize current market data and appraisal information before they lock themselves in. Being proactive, such as including provisions to enable price renegotiation or right of walk-away, can safeguard our clients from sudden changes in the marketplace.
Uncovering Hidden Costs and Fees
Assignment sale sales come with additional costs. HST has been applicable to the assignment profit since May 2022. In addition to that, you’ll be paying builder admin fees, legal fees on two closings and possibly occupancy fees. We do this by laying out every expected cost up front through our unique fixed closing cost model. Our experts go through each contract looking for hidden costs and negotiate with developers and real estate agents to prevent exorbitant fees. Transparency is the best way to ensure there are no surprises.
Avoid Scams and Bad Deals
Assignment sales have drawn in scams - fake sellers, fake buyers, shady agents. We vet everyone we do business with, insist on ID, and only work with real estate professionals we trust. We complete comprehensive background checks and require written contracts for each phase. Being cautious and slow when things feel “weird” has saved our clients from dangerous and expensive pitfalls.
Protect Your Initial Deposit
Common risk #2 - Initial deposit lost if the deal falls through. We make sure a trusted third party has your initial deposit in escrow. This might be the case with the developer’s lawyer or a reputable real estate brokerage trust account. Our contracts clearly state who receives the deposit if everything goes south. We diligently document every transaction and maintain detailed records, shielding our clients from the risk of unintentional violations.
Residential zoning laws in Canada have evolved significantly over time, shaped by legislative changes and increasing urbanization. Understanding their historical context provides insight into current practices and regulations. 
Residential zoning laws in Canada significantly affect urban development by controlling land use and guiding community growth. 
The property appraisal process in Canada involves several key steps to determine the market value of a property. These steps ensure accuracy and consistency, aiding both buyers and sellers. 
In Canada, property appraisals vary depending on the type of property being assessed. The two primary categories are residential and commercial property appraisals. 
Several factors influence property value in Canada. Understanding these can help predict how much a property might be worth. 
Contingencies in a real estate contract are vital for ensuring that both buyers and sellers have specific protections. These clauses can mitigate risks and provide an exit strategy if certain conditions are not met. Here’s how they benefit both parties: 
Navigating real estate contingencies in Canada requires understanding various legal intricacies. These contingencies protect your interests as both buyer and seller, ensuring the transaction proceeds smoothly. 
Spotting early warning signs of foreclosure can help mitigate the risk of losing your home. Timely intervention is crucial when facing financial distress in Canada. 
Preventing foreclosure involves proactive strategies and understanding available options. These tips can help you stay on top of your mortgage and avoid losing your home. 
Navigating the foreclosure process in Canada requires understanding specific legal considerations and homeowner rights. Here's what you need to know when facing this challenging situation. 
Seller's disclosure statements are pivotal in real estate transactions across Canada. They ensure transparency, support informed decisions, and mitigate risks. 
Understanding the key components of a disclosure statement is crucial for both sellers and buyers in Canada. The primary elements include property condition, environmental issues, and past repairs and renovations. 
Various common issues arise with sellers' disclosure statements in Canada, impacting both sellers and buyers.