pre construction assignment sale

Everything you need to know about Preconstruction Assignment Sales

Have you sold pre-construction homes before closing on assignments?

Have you wondered about what are the tax implications on selling pre-construction homes before closing?

We often advise our clients to not to sell their pre-construction homes before closing if possible. It can trigger a series of tax implications – HST and income tax implications.

Before the announcement of Budget 2022, CRA had adopted the policies that HST would be applicable on not just the assignment fees, but also the deposit.

This could be a huge tax cost that most investors weren’t aware of.

Now, let’s use an example to explain .

Say you agree to purchase a pre-construction home for $700,000. You sign the agreement of purchase and sale and pay a deposit of $100,000 to the builder.

The new home is expected to be completed a few years later.

You decided to sell the property on assignment before it’s ready for closing for an additional $50,000.

Scenario 1: When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence.

Life circumstances change. You now decided to sell the property before closing. You sold it on assignment before May 6, 2022 .

HST: As your intention was to move into the property as your primary residence, you had no HST liability obligation.

Again, intention is subjective. If you’re questioned in court, you would have to provide evidence to prove your own intention.

Most clients thought that the CRA would have to prove that they were wrong. The truth however is that the taxpayers are the one who have the responsibility to prove to CRA their own filing position.

Make sure your have documentation proving your initial intention.

Income Tax: Assuming you have strong documentation proving that you did intend to purchase this pre-construction home as your primary residence, the $50,000 assignment fees could be reported as capital gain.

Scenario 2: When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence.

Life circumstances change. You now decided to sell the property before closing. You sold it on assignment after May 6, 2022 .

Budget 2022 changed the rule. For all assignment sales happened after May 6, 2022, regardless of your intention, you’re required to pay HST on the assignment sales.

HST implication:

This means that the $50,000 collected is no longer all yours. This $50,000 collected, if you don’t charge HST on top, is inclusive of HST.

You must remit the HST to CRA on sale on assignment. In this case, it would have been $5.8K.

Presumably, you would also be able to claim Input Tax Credit, which is the HST you paid on services that you used to allow you to sell the property. This includes the HST you paid on your legal cost and HST you paid on brokerage fees.

The net amount can be remitted to CRA.

Income Tax Implication:

Budget 2022 also made some rule changes when it comes down to sale of property. The sale of a property within one year of ownership is considered on income account, meaning 100% of the profit you make is taxable, with some exceptions allowed, effective Jan 1, 2023.

When you apply this new rule to this scenario, it is unknown as to whether an assignment sale is considered a flipped property. It’s difficult to say whether this rule is applicable to assignment sale at this point.

Regardless, you still would need to keep proper and relevant documentation supporting your intention that you were trying to move into the property as your primary residence. With proper documentation, you could still report the net income from assignment sale on capital account, meaning only 50% of the profit you make is taxable.

In our example, assuming client didn’t incur other cost of selling, the client would be reporting $44K of capital gain, 50% of which would be taxable.

Scenario 3: When you signed the agreement of purchase and sale, you intended to rent out your property.

Interest rate changed. You now decided to sell the property before closing. You sold it on assignment before May 6, 2022 .

Your intent was never to move into the property as your primary residence or have any of your family members moving in, as a result HST is applicable on assignment sale.

Assignment fees are subject to HST. $50,000 assignment fees you collected are subjected to HST.

CRA also adopted the position that the deposits $100K are also subject to HST as well. Ouch!

You thought you made $50,000 – but after considering the HST on assignment fees $5.8K and HST on deposits $11.5K, you really only net $33K.

This calculation hasn’t considered the brokerage fees as well as the lawyer fees yet. Yikes!

Income Tax implication:

The net amount profit of $33K (assuming there’s no brokerage fees or lawyer fees, if you have, the net profit is lower) would likely have to be reported as income, 100% of it is taxable.

If you own the property in your personal name, the entire amount is added to your job income or whatever income you have in your personal name. You’re taxed at the respective marginal tax rates, which can be as high as 53.5% in Ontario.

Triple Yikes!

If you own the property in the corporation, the profit is taxed as regular business income, most likely at 12.2% for qualified small businesses.

Scenario 4: When you signed the agreement of purchase and sale, you intended to rent out your property.

Interest rate changed. You now decided to sell the property before closing. You sold it on assignment AFTER May 12, 2022 .

The Government also recognized that charging HST on deposits were not right. Budget 2022 specified that HST would no longer be charged on deposits .

Assignment fees are subject to HST but deposits are not subject to HST anymore to avoid double taxation.

Assignment fees are reported as income 100% taxable.

So continuing with the same example, HST is applicable on the $50,000 assignment fees, meaning that you would incur HST liability of $5.8K as calculated above.

Again, you could offset the HST liability with the HST you pay on realtor commission as well as lawyer fees on closing.

The net amount would have to be paid to CRA.

The net profit of $44K (assuming there’s no brokerage fees or lawyer fees, if you have, the net profit is lower) would likely have to be reported as income, 100% of it is taxable.

Similar to Scenario 3, if you own the property in your personal name, the entire amount is added to your job income or whatever income you have in your personal name. You’re taxed at the respective marginal tax rates, which can be as high as 53.5% in Ontario.

Now that we’ve gone through the assignment sales tax implication in details – Are you still planning to sell your properties on assignment?

Let us know below.

Lastly, our team has been working tirelessly to prepare for the upcoming Wealth Hacker Conference on preparing everyone for the upcoming recession. We have experts such as Dalia sharing her insights on how to protect your portfolio and grow from this recession. If you are lost, join us at the upcoming Wealth Hacker Conference.

Visit WealthHacker.ca now to get your tickets.

Until next time, happy Canadian Real Estate Investing.

Cherry Chan, CPA, CA

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A Guide to Pre-Construction Assignment Transactions

The process of “assigning” an interest in an agreement of purchase and sale is a relatively new concept in Waterloo Region and it is quickly gaining traction. The problem is that the average purchaser does not understand the intricacies of what is involved in order to successfully assign an interest in an Agreement with minimal tax implications. A further problem is that the form of the Assignment Agreement is quite complex. The purpose of this article is to break down an assignment transaction into a scenario that is frequently encountered by real estate lawyers and agents.

In 2016, John (the “Assignor”) signs an Agreement of Purchase and Sale (the “Agreement”) to purchase a new condominium unit from Builder X (the “Builder”). He purchases this unit for $300,000.00 and, over the course of a year, he puts down a $45,000.00 deposit. The unit is scheduled to be completed in 2020. John predicts, that by the time the unit is built, it will be worth more than the $300,000.00 he originally paid. In 2019, John notices that the housing market in Waterloo Region is changing dramatically, that the Region has gained attention as a real estate hot spot and that John could stand to make a large profit if he sold his unit to a third party. Acting on these circumstances, John “assigns” his interest in the Agreement to Bob (the “Assignee”) for $380,000.00. In this process, Bob effectively steps into John’s shoes as the purchaser under the original Agreement with the Builder.

John needs assistance to ensure that he assigns his unit properly. John, being a prudent purchaser, asks his real estate lawyer to review the original Agreement between John and Builder X to confirm whether the Agreement contains specific language which prohibits or restricts John from assigning the Agreement to Bob, and whether John can assign the Agreement without obtaining prior written consent from Builder X. Spoiler alert: most pre-construction agreements contain this prohibition. In fact, most pre-construction agreements will contain wording to the effect that consent may be “unreasonably and arbitrarily withheld” by the builder or consent may be “at the builder’s sole and unfettered discretion”. In the event that written consent is provided, the builder will likely collect a fee for authorizing the assignment, prohibit any subsequent assignments and insist that the original buyer remain on the hook until final closing if the Assignee, Bob in this case, fails to complete the transaction with the Builder.

It is fortunate that John engaged his real estate lawyer prior to finalizing his transaction with Bob. John has discovered that Builder X will charge John a fee of $5,000.00 to authorize the assignment.

John’s lawyer has also flagged another concern: John’s initial deposit AND his profit may be taxable by the Canada Revenue Agency (“CRA”). Let’s explore why John’s lawyer believes the assignment transaction is taxable. Whether an assignment is taxable or exempt from HST turns on the status of the Assignor as a “builder” for HST purposes. If the Assignor (in this case, John) is considered to be a “builder”, the Assignor will be required to collect and remit HST on the markup earned through the assignment (in this case, $80,000.00). Exactly how does the CRA make this determination? The CRA looks at intention. In investigating the Assignor’s intention, it is necessary to look at the Assignor’s circumstances at the time the original Agreement was signed.

The CRA will look at several factors in determining John’s intentions. Here are a few:

Is the Assignor a corporation?
Does the Assignor take action to attract buyers while the property is under construction?
How is the Assignor financing the purchase?
Has the Assignor entered into multiple Agreements to purchase multiple units at around the same time?
Is the Assignor’s stated intention to occupy the residence supported by his/her circumstances?
Is the Assignor’s pattern of activity such that occupation of the property demonstrates that his/her use will not be permanent?
Was the assignment triggered by an unforeseen and intervening event?

John’s lawyer determines that John’s primary purpose of purchasing the unit was to sell his interest in the unit to a third party. John lives and works in Toronto and is married with 4 children. The condominium unit he agreed to purchase from Builder X is in the heart of Uptown Waterloo – a stunning 600 Sq Ft studio. While John did not construct the unit, for GST/HST purposes, he is considered to be a builder as he was “intending to sell the property or an interest in it or to lease the property”. John doesn’t see how he can alter his circumstances to support an alternative intention. John is second guessing whether he should proceed with this assignment transaction as his profit margin is quickly declining.

Fortunately, John’s lawyer has a solution. John’s lawyer recommends to John that the assignment agreement should be worded such that HST is “in addition to” the assignment price as the transaction is subject to HST. John’s lawyer also adds a clause into Schedule “A” of the assignment agreement to confirm John’s intent to sell or lease the property. John is happy again.

Let’s revisit our scenario and think about what we’ve just discovered. The initial deposit is $45,000.00. John wants Bob to reimburse him for the deposit paid to Builder X. John also wants $80,000.00 (the “Assignment Fee”) from Bob in exchange for Bob taking John’s place as purchaser under the Agreement with Builder X. The total consideration is therefore $125,000.00 and all of it (yes, all of it – not just the profit but the deposit as well) is subject to taxation. Now Bob is unhappy.

Bob is concerned about HST. Bob engages his own lawyer. Bob’s lawyer reconfirms the HST implications in relation to the Assignment Fee and informs Bob that the Assignment Fee does not reflect his total financial obligation as the Assignee. Bob is a player in two distinct transactions:

Transaction #1 = Bob’s Assignment from John
Transaction #2 = Bob’s Purchase with Builder X

Bob’s lawyer reminds Bob that by entering into an Assignment Agreement, he is stepping into the shoes of John as the purchaser. Bob is assuming the original purchaser’s financial obligations under the Agreement with Builder X, however, Bob has no opportunity to renegotiate any of the terms of the original Agreement. Bob’s lawyer wants to review the original Agreement, any amendments and notices to the Agreement and Builder X’s disclosure package. Bob’s lawyer brings the various closing adjustments to Bob’s attention. Bob will be on the hook for another $37,200.00 in adjustments to Builder X according to his lawyer’s estimations.

That’s not all. Bob’s responsibility to pay Land Transfer Tax (“LTT”) is also increased. In addition to paying LTT on the original purchase price of $300,000.00, Bob will also have to pay LTT on the Assignment Fee under the Assignment Agreement. Now Bob is very unhappy.

Bob’s lawyer has a recommendation for Bob. He suggests that Bob take advantage of the HST New Housing Rebate (“New Housing Rebate”). Bob already knows about this rebate. Bob is aware that under most new construction agreements it is assumed that the purchaser qualifies for the rebate and therefore the purchase price is listed as inclusive of the rebate for marketing purposes. In doing so, the builder fronts the rebate as a credit to the purchaser and applies to CRA following closing in order to recover the rebate from CRA. What Bob does not know is that if he submits a rebate application after completing his purchase with Builder X (as opposed to in conjunction with the transaction with Builder X), he will be able to claim the rebate over the Assignment Fee as well. If the Assignee meets the qualifications of the New Housing Rebate, the Assignee can recover from CRA a rebate for up to $24,000.00. Bob’s lawyer also tells him that only one New Housing Rebate application can be filed per dwelling.

To qualify for the New Housing Rebate, the applicant must: 1. Intend to acquire the property as a primary place of residence; 2. the property must never have been occupied prior to title transfer; and 3. the applicant (or their relative) must occupy the property continuously for a minimum of one year.

Bob’s lawyer concludes that Bob would benefit from applying for the New Housing Rebate on his own following the completion of the purchase transaction. Bob would be eligible for a rebate of $22,243.35 on the original Agreement price of $300,000.00. However on $380,000.00, the Assignment price, Bob’s rebate would increase to the maximum amount available: $24,000.00. Bob will recover an additional $1,756.65 if he applies for the rebate on his own. Bob is happy again!

As lawyers, it is important to ask our clients detailed questions prior to waiving a “lawyer review” condition in an agreement. Here is a list of questions a prudent lawyer would ask when presented with an assignment agreement:

Has the Assignor provided the Assignee with the builder’s written consent to authorize the assignment agreement?
Have the parties determined who will be responsible to pay any assignment fees if such are due to the builder?
Is the Assignor’s deposit with the builder in good standing?
If not, has the Assignor made arrangements to bring the deposit into good standing including any applicable NSF charges?
Has the Assignor contracted with the builder for any upgrades to the property that have not yet been paid as of the date of entering into the Assignment Agreement?
Is the Assignee permitted to contract for any additional upgrades with the builder?
Does the Assignment Fee include the cost of the upgrades contracted for to date?
Does the Assignment Fee include the cost of any “incentives” offered by the builder to the Assignor under the original Agreement? Are these incentives transferrable to the Assignee?
Has the Assignee reviewed the disclosure statement and original Agreement? Has the Assignee noted the additional adjustments that may be payable to the builder upon final closing and is the Assignee aware that such adjustments are the Assignee’s responsibility?
Has the Assignor provided the Assignee with all amendments, waivers and notices as provided by the Vendor?
Has the Assignee ensured with its lender that the Assignee will qualify for financing to complete the transaction?
Has proof of the Assignee’s financing been provided to the Assignor and to the Vendor?
Does the Assignee qualify for the New Housing Rebate?
Has the Assignee obtained confirmation from the builder that the Assignee will be credited with the New Housing Rebate on the builder’s statement of adjustments if the Assignee qualifies for rebate?
Is it in the Assignee’s best interest to collect the New Housing Rebate through the purchase transaction?
Have the parties agreed when the Assignment Fee will be paid by the Assignee to the Assignor? Will it be at completion of the purchase transaction or at the time the Assignment Agreement is accepted?

So, what happens to John, Bob and Builder X? After conferring with their respective lawyers and after serious negotiation, the parties agree as follows: Bob will purchase John’s interest in the unit for $380,000.00 + HST as further set out in Schedule “A” of the Assignment Agreement. John agrees to assume responsibility for HST on the deposit to be recovered ($45,000.00) from Bob. Bob agrees to remit HST on the $80,000.00 Assignment Fee. As Builder X has had little dealing with Bob to date, Builder X is happy to add the potential rebate amount ($22,243.35) back into the sale price of the unit ($300,000.00). Out of caution, Builder X’s consent to permit the assignment continues to hold John liable to complete the transaction in the event that Bob fails to do so. Bob completes both transactions and applies for the New Housing Rebate post-closing.

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The Condo Assignment Process: Everything You Should Know

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September 15, 2018 | Selling

Condo assignment sales are different from typical pre-construction transactions. Whether you’re on the buyer or seller side, the condo assignment process is unique—which is why you should take the time to learn about the costs, timelines, and other specifics involved.

If you’re thinking about buying or selling a condo on assignment, here’s what you should know…

What is a condo assignment sale.

An assignment sale occurs when a pre-construction condo buyer decides to sell before closing. Since they don’t technically own their unit (which may not be completed yet), what they’re really selling is their purchase agreement with the builder.

The concept sounds simple. However, there are some ins and outs that both sellers and buyers should know to ensure that their transaction is legally above board—and in their best interests.

Seller FAQs

Thinking of selling your pre-construction condo on assignment? Here are some answers to the most commonly asked questions sellers have about the process.

Should I sell my condo on assignment?

Pre-construction buyers often sell condos on assignment as part of an investment strategy. That said, there are other instances where going this route makes sense.

Maybe your lifestyle has changed, and the unit you were excited about a year ago is no longer ideal. Perhaps you’re facing some financial challenges, and you need some cash in the short term. Whatever your circumstances, a real estate agent with condo expertise can help you decide if selling on assignment is right for you.

What are the tax implications of selling on assignment?

While there’s nothing wrong with assignment sales, some Canadian investors have gotten themselves in hot water for making them without paying taxes on their profits. Regulators have been cracking down on these transactions, which is why knowing your taxation responsibilities is crucial.

The bottom line? If you’re making an assignment sale, it’s best to speak with a financial expert before moving forward.

Does the builder need to be involved?

Your Agreement of Purchase and Sale will specify whether selling your condo on assignment is permitted. Either way, you should obtain consent beforehand. There’s a very good chance that builder approval of an assignment sale is a condition in your contract—so read it carefully.

How much will it cost to sell on assignment?

If the builder signs off on your sale, you’ll probably still have to pay a fee. This sum could range from a few hundred dollars to several thousand, and in some instances it is waived by the developer. You should also be aware that, along with the regular costs associated with selling, your legal fees may be higher than they would be for a simpler transaction.

Will I get my deposit back?

A purchaser who is buying on assignment (also known as an “assignee”) usually pays the assignor their full deposit. As part of a typical deal, you should receive the amount you’ve paid to date, sometimes along with your profit, on closing day.

How can I find a buyer?

Be aware that there are marketing restrictions placed on most assignment sales. While it depends on the terms of your agreement with the builder, you probably won’t be able to post on the MLS or online.

If you market your assignment in violation of your contract, the builder may be able to cancel your agreement—and hold onto your deposit. For this reason, working with an agent who knows the local condo market is your best bet for finding a buyer.

Are you thinking of purchasing a pre-construction condo on assignment? Read answers to some of the most common questions buyers have first.

When is buying a condo on assignment a good idea?

If you’re excited about a particular condo development that has no remaining inventory, buying on assignment could be your way into the building. In many cases, the price for a unit is lower when it’s sold this way than it would be if it were on the market as a resale unit.

On the flip side, assignment sales tend to be more complicated than traditional condo transactions. They often entail costs, risks, and legal minutiae that aren’t part of conventional resale and pre-construction purchases.

An agent with condo market expertise can help you weigh the pros and cons of including assignment sales in your condo search.

Can I renegotiate the terms of the agreement in place?

No. When you buy a condo on assignment, you’ll be expected to fulfill the terms and conditions that the original buyer agreed to (and take on any potential risks associated with them). For this reason, it’s very important that you protect your interests by working with an experienced real estate lawyer.

Fortunately, you may be able to negotiate with the seller (or “assignor”) regarding the specifics of your purchase with them. Assignors are often in the midst of a life transition, and they may be eager to make a deal and move on.

Which costs will I pay?

Along with the sum you’ve agreed to, you will almost certainly be expected to pay the assignor the amount they’ve put towards their deposit to date. Unless your contract specifies otherwise, you will be responsible for final closing costs including (but not limited to) land transfer taxes, development fees, Tarion fees, and HST if applicable.

As part of the assignor’s original agreement, development charges may be capped. If this is the case, you could wind up spending significantly less money—so it’s worth looking into.

How will closing work?

Closing on an assignment sale can be complicated for the assignee. You’ll have to go through the process twice: once when your deal is finalized with the assignor, and again when you close with the builder. During the first closing, you’ll pay the assignor their deposit and sometimes the profit. The profit portion could be renegotiated and paid on the second closing. During the second, you’ll pay the developer the remainder of what’s owed.

Don’t forget about the occupancy period! Once your unit is fit to be occupied, you will pay a sum that’s approximately equal to your monthly mortgage payments and condo fees until the building is registered.

What else should I know?

In addition to understanding the assignment process, you should be aware of the pros and cons that go along with buying a pre-construction condo. Your purchase will come with certain risks that the original buyer was willing to take on—such as delays to closing. On the flip side, there’s nothing quite like moving into a beautiful, brand new condo.

When handled correctly, condo assignment sales can be beneficial to buyers, sellers, and developers. Just remember that understanding the process is the key to success—which is why working with the right real estate and legal professionals is so important!

Interested in buying or selling a pre-construction condo? Let’s discuss it! Call or shoot me a text at 416-500-5360, or email me at [email protected].

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10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)

— We take our content seriously. This article was written by a real person at BREL.

What’s an assignment?

An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract. The Buyer of an assignment is essentially stepping into the shoes of the original purchaser.

The original purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.

Do assignments only happen with pre-construction condos?

It’s possible to assign any type of property, pre-construction or resale, provided there aren’t restrictions against assignment in the original contract. An assignment allows a Buyer of a any kind of home to sell their interest in that property before they take possession of it.

Why would someone want to assign a condo?

Often with pre-construction sales, there’s a long time lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

Another common reason why people want to assign a contract is financial. Sometimes, the original purchaser doesn’t have the funds or can’t get the financing to complete the sale, and it’s cheaper to assign the contract to a new purchaser, than it is to renege on the sale.

Lastly, assignment sales are also common with speculative investors who buy pre-construction properties with no intention of closing on them. In these cases, the investors are banking on quick price appreciation and are eager to lock in a profit now, vs. waiting for the original closing date.

What can be negotiated in an assignment sale?

Because the Assignee is taking over the original purchaser’s contract, they can’t renegotiate the price or terms of the contract with the Builder – they are simply taking over the contract as it already exists, and as you negotiated it.

In most cases, the Assignee will mirror the deposit that you made to the Builder…so if you made a 20% deposit, you can expect the new purchaser to do the same.

Most Sellers of assignments are looking to make a profit, and part of an assignment sale negotiation is agreeing on price. Your real estate agent can guide you on price, which will determine your profit (or loss).

Builder Approval and Fees

Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and actually read it.

Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder (we’ve seen everything from $750 to $7,000).

There may be additional requirements as well, the most common being that the Builder has to approve the assignment.

Marketing Restrictions

Most pre-construction Agreements of Purchase & Sale from Toronto Builders do not allow the marketing of an assignment…so while the Builder may give you the right to assign your contract, they restrict you from posting it to the MLS or advertising it online. This makes selling an assignment extremely difficult…if people don’t know it’s available for sale, how they can possibly buy it?

While it may be very tempting to flout the no-marketing rule, BE VERY CAREFUL. Buyers guilty of marketing an assignment against the rules can be considered to have breached the Agreement, and the Builder can cancel your contract and keep your deposit.

We don’t recommend advertising an assignment for sale if it’s against the rules in your contract.

So how the heck can I find a Buyer?

There are REALTORS who specialize in assignment sales and have a database of potential Buyers and investors looking for assignments. If you want to be connected with an agent who knows the ins and outs of assignment sales, get in touch…we know some of the best assignment agents in Toronto.

What are the tax implications of real estate assignment?

Always get tax advice from a certified accountant, not from the internet (lol).

But in general, any profit made from an assignment is taxable (and any loss can be written off). The new Buyer or Assignee will be responsible for paying land transfer taxes and any HST that might be due.

How much does it cost to assign a pre-construction condo?

In addition to the Builder assignment fees, you will likely have to pay a real estate commission (unless you find the Buyer yourself) and legal fees. Because assignments are more complicated, you can expect to pay higher legal fees than you would for a resale property.

How does the closing of an assignment work?

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. On the second closing (between the Builder and the Assignee), the Assignee pays the remaining amount to the Builder (usually with the help of a mortgage), and pays land transfer taxes. Title of the property transfers from the Builder to the Assignee at this point.

I suppose it could be said that there is a third closing too, when the Buyer takes possession of the property but doesn’t yet own it…this is known as the interim occupancy period. The interim occupancy occurs when the unit is ready to be occupied, but not ready to be registered with the city. Interim occupancy periods in Toronto range from a few months to a few years. During the interim occupancy period, the Buyer occupies the unit and pays the Builder an amount roughly equal to what their mortgage payment + condo fees + taxes would be. The timing of the assignment will dictate who completes the interim occupancy.

Assignments vs. Resale: Which is Better?

We often get calls from people who are debating whether they should assign a condo they bought, or wait for the building to register and then sell it as a typical resale condo.

Pros of Assigning vs. Waiting

Get your deposit back and lock in your profit sooner
Avoid paying land transfer taxes
Avoid paying HST
Maximize your return if prices are declining and you expect them to continue to decline
Lifestyle – sometimes it just makes sense to move on

Cons of Assigning vs Waiting

The pool of Buyers for assignment sales is much smaller than the pool of Buyers for resale properties, which could result in the sale taking a long time, getting a lower price than you would if you waited, or both.
Marketing restrictions are annoying and reduce the chances of finding a Buyer
Price – What is market value? If the condo building hasn’t registered and there haven’t been any resales yet, it can be difficult to determine how much the property is now worth. Assignment sales tend to sell for less than resale.
Assignment sales can be complicated, so you want to make sure that you’re working with an agent who is experienced with assignment sales, and a good lawyer.

Still thinking of assignment your condo or house ? Get in touch and we’ll connect you with someone who specializes in assignment sales and can take you through the process.

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Raj Singh says:

What can be things to look for, especially determining market value for an assigned condo? I’m the assignee.

Sydonia Moton says:

Y would u need a lawyer when u buy a assignment property

Gideon Gyohannes says:

Good clear information!

Who pays the assignment fee to the developer? Assignor or Assignee?

Thanks Gideon 416 4591919

Melanie Piche says:

It’s almost always the Seller (though I suppose could be a point of negotiation).

Fiona Rourke says:

If there are 2 names on the agreement and 1 wants to leave and the other wants to remain… does the removing of 1 purchaser constitute an assignment

Brendan Powell says:

An assignment is one way to add or remove people from a contract, but not the only way…and not the simplest. Speak to your lawyer for advice on what makes the most sense for your specific situation. For a straightforward resale purchase you could probably just do an amendment signed by all parties. If it’s a preconstruction purchase with various deposits paid, etc it could be more complicated.

Katerina says:

Depends on the Developer. Some of them remove names via assignments only.

Haroon says:

Is there any difference in transaction process If assigner or seller of a pre constructio condo is a non resident ? Is seller required to get a clearance certificate from cRA to complete the transaction ?

Nathalie says:

Hello , i would like to know the exact steps for reassignment property please.

Amazing info. Thanks team. I may just touch base with you when my property in Stoney Creek is completed in. 2020. I may need to reassign it to someone Thanks

Victoria Bachlowa says:

If an assignor renegs on the deal and refuses to close because they figured out they could get more money and the assignment was already approved by the builder and all conditions fulfilled what can the Assignee do. I have $33,000 dollars in trust in the real estate’s trust fund. They sent me a mutual release which I have not signed. The interim occupancy is Feb. 1 and the closing is schedule for Mar. 1, 2019. I have financing in place, was ready to move in Feb. 1 and I have no where to live.

Definitely talk to your lawyer right away. They’ll want to look at your agreement of purchase and sale and will be able to advise you.

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. Can I assume that these closing happen at the same time? I’m not sure how and when I would be paid as the Assignor.

What happens to the deposits or any profits already paid if the developer cancels the project after an assignment?

Hi, Did you get answer to this? I did an assignment sale last year and now the builder is not completing apparently and they are asking for their money back. Can they do that? After legal transactions, the lawyer simply said “the deal didn’t go through”. Apparently builder and the person who assumed the assignment agreed on taking out the deal. What do I have to pay back after it was done a year ago

This is definitely a question for your lawyer – as realtors we are not involved in that part of the transaction. I would expect that just as the builder would have to refund your deposits, you would likely need to do the same…but talk to your lawyer. As to whether the builder can cancel a project, yes they always reserve that right (but the details of how and under what circumstances would be in your original purchase agreement). It’s one of the annoying risks in buying preconstruction!

I completed the sale of my assignment in Dec 2015 however the CRA says I should be reporting the capital income in 2016 when the assignee closed his deal with the developer in July 2016. That makes no sense to me since I got all my money in Dec 2015. Can you supply any clarification on that CRA policy please?

You’d have to talk to the CRA or an accountant – we’re real estate agents,so we can’t give tax advice.

Hassan says:

Hello, You said that there are two closings. The first one between the assignor and the assignee and the second one between the builder and the new buyer (assignee). My question is that in the first closing does the assignee have to pay the assignor the deposit they have paid and any profit in cash or will the bank add this to the assignee’s mortgage?

The person doing the assigning usually gets their money at the first closing.

Kathy says:

What is the typical real estate free to assign your contract with the builder ?

Hi Kathy While we do few assignments (as they are rarely successful, and builders do not make it easy), in past we have charged more or less the same as we do for a typical resale listing. While there are elements to assignments that should be easier than a resale (eg staging), many other aspects of assignments are much MORE time-consuming, and the risk much higher since attempts to find a buyer for assignments are often unsuccessful. It’s also important to note that due to the extra complication, lawyer’s fees to assign are typically higher than resale as well–although more $ for the purchase side vs the sale side.

Mitul Patel says:

If assignee has paid small amount of deposit plus the original 25% deposit that the assignor has paid to the builder and gets the Keys to the unit since interim possession has been completed, when the condo registration is done and assignee is getting mortgage from the Bank or Pays the remaining balance to the Builder using his savings and decides not to pay the Balance of the Profit amount to Assignor, what are the possibilities in this kind of scenario?

You’d need to talk to a lawyer to find out the options.

David says:

How much exactly do brokers get paid at sale of Assignment? i.e. Would the broker’s fee be a % of your assignment selling price or your home’s selling price? I’m really looking for a clear answer.

I am using this website’s calculator associated with selling your home in Ontario. But there is no information on selling assignments. https://wowa.ca/calculators/commission-calculator-ontario

Realtors set their own commission, so there is no set fee- that website is likely the commission that that agent offers. We often see commissions of 4-5% for assignments. The fee is a % of the price of the assignment – for example, you originally bought for $500K; you’re now assigning for $600K – commission would be payable on the $600K.

Candace says:

Question: if i bought a pre construction condo, can i sell it as soon as it closes or do i have to live in it for 1 year after closing in order to avoid capital gains taxes?

Or does the 1 year start as soon as you move in?

I would suggest you talk to your accountant re: HST credit implications and capital gains, but if you sell it for more than you paid for it, capital gains usually apply.

You mention avoid paying HST when you assign your property. What is the HST based on? It’s not a commercial property that you would pay HST. Explain. Thanks.

HST and assignments are complex and this question is best answered specific to your situation by your accountant and real estate lawyer. In some cases HST is applicable on assignment profits – more details can be found on the CRA website here:

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120/assignment-a-purchase-sale-agreement-a-new-house-condominium-unit.html

If you are a podcast listener, the true condos podcast is also a great resource.

https://truecondos.com/cra-cracking-down-on-assignments/

heres one for your comment, purchase pre construction from builder beginning of 2021, to be finished end of 2021, (semi detached) here we are end of 2022, both units are now ready. Had one assigned but because builder didnt accept within certain time frame(they also had a 90 day clause wherein we couldnt assign prior to 90 less firm closing date (WHICH MOVED 4 TIMES). Anyrate now we have a new assinor but the builder says we are in default from the first one and wants 50k to do the assignment (the agreement lists the possibility of assigning for 12k) Also this deal would include us loosing our whole deposit and paying the 12k(plus fees) would be in addition too the 130k we are already loosing. The second property we are trying to close but interest rates are riducous, together with closing costs(currently mortgage company is asking that my wife be added to that one, afraid to even ask this builder. Any advice on how to deal with this asshole greedy builder? We are simply asking for assignment as per contract and a small extension for the new buyer(week or two) Appreciate any advice. Thank you

Dealing with builders/developers can be extremely painful, much worse than resale transactions in our experience. Their contracts are written to protect THEM. Unfortunately all I can say is follow the advice of your lawyer.

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GTA-Homes » Real Estate Info » Assignments

Assignments

An Assignment Sale in the Pre-Construction Market

Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself. Only the contract can be sold.

When you purchase a pre-construction condominium unit, you will be given an assignment clause/right in the form of a contract. You can choose to sell your assignment before the condominium is even built.

Assignee/Buyer is not buying a property from Assignor – Assignee is buying the “right” to acquire property from a 3rd party (usually a builder)
Assignor assigns its interest and rights in the Original Agreement with the Builder (or original seller)
Assignor assigns to the Assignee its interest in the original “deposit”
Assignee “assumes” and agrees to perform all of the Assignor’s obligations under the Original Agreement

Once the building has been constructed and registered by the city, the ownership will be transferred to the buyer. Until then, it’s just the sale of a contract, but as you will see, there are many advantages to these kinds of sales for both the buyer and seller.

In this article, you will learn more about assignment sales, why they are used, the process of this transaction and how it can be transferred.

This way, you will be able to determine if an assignment sale is right for you. We at GTA-Homes strive to provide our clients with the knowledge of the pre-construction market, so that they can make a more informed choice when it comes to investing in their future.

An assignment sale can be mutually beneficial for both the buyer and the seller.

See all assignment listings, what you'll learn....

What Is an Assignment Sale?

An Example of an Assignment Sale

Buying an Assignment

Selling an Assignment

Assignments faq.

The Details of an Assignment Sale

What Is an Assignment Sale? Why Do These Kinds of Sales Happen?

There are many reasons why someone might want to sell the rights to their unit before it’s been built. For example, someone may have bought a suite that’s three years away from being completed, but recently had to relocate for a job. This buyer may need to sell their agreement to afford a property in their new city. Another common reason is that a buyer began the purchase process when they were single but during the pre-construction process they married or are now expecting a child. Suddenly they’ve discovered that the pre-construction one-bedroom suite they bought is not big enough for a growing family.

The “ assignment clause ” in the purchase agreement comes in handy when these things happen. It allows the original buyer to pass the contract onto somebody else without accruing financial penalties.

These types of transactions are common and fully legal, but whether you are the buyer or the seller, it’s important to work with both an experienced realtor and lawyer who know how to protect your interests.

These deals are more complex than a conventional resale and involve three parties: the developer, the assignor and the assignee. It’s a two-stage process that involves both interim occupancy and the final closing.

This is just the basics of an assignment deal. There are more details regarding mortgage rules, and other contract details. Keep reading to learn more! Or you can always reach out to talk with one of our agents. We love to talk condos! This is just a general overview, but each arrangement is unique with its own rules, terms, and conditions.

We advise everybody who is thinking of buying or selling a pre-construction assignment to seek advice from a real estate agent, lawyer and tax accountant. Contacting an agent is important because assignors may have to pay a fair amount of tax on any profits they received from the completed sale

Most builders allow assignment sales and you will often see these listings on REALTOR.ca. However, there are some rules in the original purchase agreement that must be followed. They are also more complicated than a regular sale because a mortgage cannot be obtained on the closing of the transaction, only once the building has been registered. Other issues such as occupancy, reimbursement of the seller’s deposits and more must be taken into account.

In 2017, John Smith buys a pre-construction condominium suite from ABC Developments for $400,000 with a total down payment of 20%, equalling $80,000. The project is set to be completed in 2022.

In 2021, John discovered he will be relocated to a new city. He can’t afford to buy a new home while holding onto his pre-construction condo.

Fortunately for John, the assignment clause allows him to sell the contract for his unit before the building is completed and registered!

John has decided to sell the contract to his unit to Jane Doe. Due to the changes in the market, he was able to sell the contract for $500,000.

Assignment Purchase:

Assignment Agreement: $500,000
Original Purchaser (Assignor) = John Smith
New Purchaser (Assignee) = Jane Doe
Vendor (Builder) = ABC Developments

Assignment Purchase Price by John Smith to Jane Doe = $180,000, due immediately. This includes a deposit of $80,000 + profit $100,000. The amount and timeframe for this payment can also be negotiated.

In 2022 when the building is complete and ready for interim occupancy, Jane Doe will move into the unit during the occupancy period. At this point she will begin paying occupancy fees to the developer. These fees take the place of mortgage payments and condo fees until the building can be registered.
Interim occupancy happens when the city has designated the property as safe to live in. The building will be officially registered once the municipality does a final inspection. Jane Doe can occupy her suite in the meantime until the building is officially registered.

The advantages for buying Assignment Sale

Assignment Details:

When the building is officially registered by the city, the official title transfer takes place between the developer and the new purchaser. Jane Doe can finally register a mortgage and start paying her mortgage payments and condominium fees.
Funds required to complete the sale by Jane Doe to the builder = $320,000
Jane Doe now has all the rights to the property, just like any homeowner. Any future re-sale of the property will consist of a regular real estate transaction.

Is It Worth It to Buy an Assignment?

Assignment purchases can actually give you some of the best deals in the GTA condo market because fewer people typically seek out these types of sales. In addition to fewer buyers, many real estate agents aren’t familiar with the structure of an assignment sale and often won’t bother to advertise these listings. Even lawyers may not know the ins and outs of an assignment sale.

The high demand in the resale market can potentially force buyers into bidding wars, which can cause people to overpay for their suite. Buying a contract through assignment gives you the opportunity to avoid excessive competition and often means you pay much less than you would for a resale unit.

The assignment condo market can be mutually beneficial for both the buyer and the seller. The seller can list their unit without having to wait until the building is completed, and the buyer can save time and potentially thousands of dollars.

Another advantage to buying an assignment agreement is that you will get a brand-new unit that automatically comes with the seven-year Tarion Warranty Program. Let’s not forget that you’ll likely move into the unit sooner instead of waiting the usual 3 to 4 years for the building to be completed!

Let’s Recap Some of the Advantages for Buyers:

Options: More choices when there’s a shortage of listings in the market.
Less Competition: Fewer people look at these types of listings.
Peace of Mind: Fewer people looking at these sales means there’s less of a chance for a bidding war. You can avoid bidding wars and paying more than you can afford just to outbid another buyer.
You Become A VIP: You will likely inherit VIP incentives like the seven-year Tarion Warranty Program and other incentives from the builder such as credits, upgrades, capped developing charges and much more.
More Choices: Depending on how far along construction is, you may still be able to select your own finishes, colors and upgrades.
Negotiate: Sellers usually need to sell because they need to drop their equity. This can give you leverage for prices, deposits, and closing dates.
Brand New Suite: You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract. Oftentimes the occupancy date is just a couple of months away.
Taxes: You may also benefit from saving on taxes like GST and HST.

We love to chat about the assignment sale market, so don’t wait, give us a call and let’s find you a great deal.

Traditionally, owners who wanted to sell their pre-construction units had to wait months or years for the final closing date to officially put their suite up for sale. By this time, they could have already put significant funds into occupancy fees and closing costs.

Assignments sales is not a new strategy in Canada, but compared to other countries where condos have been around much longer, the process is not always well understood by sellers, buyers, agents, lawyers, and even lenders. Sellers who have been taking the time to learn about assignments have been reaping the rewards by saving time and maximizing their profits.

These transactions are becoming increasingly popular. Think of it as a sort of condo flipping. Sellers can transfer their property rights during or before interim occupancy and avoid paying hefty carrying and closing costs, which helps them get their deposits back.

Most builders allow assignment sales, although they often have certain rules that must be followed. Even with strict rules in place, however, there are options available for you.

Let’s Take a Look at the Advantages for Sellers:

Insurance Policy: In the event that your situation changes and you no longer need your unit, you are able to sell your assignment and pull out your equity.
No Carrying Costs: You can avoid paying monthly fees like occupancy fees that can sometimes last for up to two years.
No Closing Costs: You don’t need to take out a mortgage or incur any other closing costs.

What is an Assignment Sale?

It is the sale of a contract to purchase a pre-construction unit. This means, instead of selling an already built unit, what’s being sold is the contract or right to acquire the property upon completion. The original purchaser (the "assignor") of a property sells their obligations under the original contract to a new purchaser (the "assignee").

The assignee will generally assume all of the assignor's duties and obligations, such as interest payments, taxes, and maintenance fees during interim occupancy. Upon completion, the assignee is granted the title to the real property and will incur all final closing costs.

Can any kind of purchase agreement involving a real estate transaction be assigned?

Under normal circumstances, any purchase agreement can be assigned, providing the agreement doesn’t prohibit it.

Is an Assignment legal?

It is legally permitted unless prohibited in writing in the original agreement of purchase and sale. In some cases, the developer may charge the assignor a fee for this kind of sale.

Is it necessary to get permission from the developer to assign the contract?

That depends. You need to consult your purchase agreement to get the specifics. Generally developers will not permit an assignment sale without their consent, which means you’ll need to consult with them and a legal representative. There have been incidents where an unauthorized assignment sale has resulted in the original agreement being terminated, and the deposit withheld!

Is there a standard legal form for these types of sales?

Yes, there are two: OREA Form 150 Assignment of Agreement of Purchase and Sale Condominium and OREA Form 145 Assignment of Agreement of Purchase and Sale (including applicable schedules.) In most cases, the developer will have their own form as well.

Will either the assignor or assignee’s lawyer services be adequate?

It is essential that the assignor and assignee each retain a lawyer with expertise in this area of real estate.

Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?

Sometimes. Double check with your builder, as it depends on whether they permit advertising.

What happens if the construction, occupancy, closing, or unit transfer date is delayed?

In the event of a delay, the agreement is still valid. This means the assignee has agreed to take on the agreement and all responsibilities associated with it, including delayed construction or occupancy.

What if the assignee doesn't close?

This is no different than any other property sale, meaning the assignor, in most cases, is not released from the obligations under their original purchase agreement. In this situation, both the assignor and assignee will be liable.

What is the cost of assigning an Agreement of Purchase and Sale?

If the developer consents to the arrangement, there will generally be an administration fee and legal fees. These fees will vary. Consult the original purchase agreement and the developer for specific information.

When does the assignor get their money?

This generally depends on the closing date and the terms of the agreement that the assignor and assignee agreed on. Usually the assignor is paid when:

the assignee takes possession or,
when the developer approves the process, if applicable or,
when the assignee obtains legal title

Who gets the interest, if any, payable by the builder on the original deposits?

Unless otherwise specified, the interest is likely to be paid to the assignor.

Who pays the interim occupancy costs?

Once the assignment is finalized, the assignee will typically pay occupancy costs.

What closing fees are payable?

After the condominium is registered, the builder transfers the ownership title to the assignee. The assignee pays the balance to the builder and any amount still owed to the assignor. Some of the costs the assignor may pay include:

Estimated property taxes for up to 2 years
Hydro/water/gas meter installation and connection charges (approx. $500–$700 per meter)
Development charges/levies (potentially thousands of dollars)
Tarion New Home Warranty (ranging from $600–$1,900. See Tarion website for fee structure)
Discharge of builder’s mortgages (approx. $200–$300 per mortgage)
Builder’s lawyer’s Law Society charge (approx. $70)
Two months of occupancy fees for reserve fund
Other amounts set out in the Agreement of Purchase and Sale

These costs are typically not financed with a mortgage. The assignee is responsible for the following additional fees:

Legal fees and disbursements
Land transfer tax (provincial and municipal)
GST/HST rebate
Municipal levies

If you’re interested in either buying or selling an assignment, you need a realtor who is experienced in finding, negotiating and drawing up the offer for these types of sales. This means you’ve come to the right place! We have a wealth of expertise, knowledge and resources when it comes to assignment sales and we would be more than happy to discuss the idea with you.

Need More Information? That’s What We’re Here For.

Check Out These Helpful Buying / Investing Articles…

Why Pre-Construction Condos Are the Best Investment
Most Frequently Asked Questions
Why Buy With a Platinum Agent
Interim Occupancy and Final Closing
Steps to Buying a Pre-Construction Condo
Renting vs Buying
Condo Investments
Pre-Construction Condo Closing Costs
Pre-Delivery Inspection
Statement of Critical Dates
Condo Project Cancellations
First Time Home Buyer Incentive
Community Benefits Charges
Glossary of Real Estate Terms and Definitions
How Condo Developers Determine Price Per Square Foot
Section 37 Levies
10 Day Cooling Off Period
Development Charges and Levies
Important Documents to Review When Purchasing a Pre-Construction Condo
Land Transfer Tax
Condominium Registration
Condominium Corporations
Condo Reserve Fund
Inclusionary Zoning
Common Elements
Raising Issues With The Condo Board
Condominium Management
Requesting Condominium Records
Meetings and Voting In A Condo Corporation
Condominium Insurance
Renting Your Condo Unit
GST/HST New Housing Rebate
What Are Interest Rates?
Everything You Need to Know about Mortgages
What Is the Ontario New Home Warranty Program?
Deposit Structures for Pre-Construction Condos
What Are Condo Maintenance Fees?
Do I Need a Property Manager?
How to Find Qualified Tenants for Your Rental Property
What Are Buyer Incentives?
What Are The Motives For Investing in Real Estate?
What is Title Insurance?
What is Delayed Occupancy?
How to Pay Off Your Mortgage Faster
First Home Savings Account (FHSA
Landlord and Tenant Rights and Responsibilities
The Best Building Amenities for Your Condo Investment
How to Read Condo Floor Plans
How Real Estate Pricing Has Changed In the Last Four Decades
Local Area Amenities That will Increase Your Condo Investment Value
Invest in Real Estate for Wealth and Retirement
The Home Construction Regulatory Authority (HCRA)
What to Consider When Selecting the Ideal Condo
Residential vs Commercial Mortgages
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What to Look For in a Condo Developer
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A Comprehensive Guide To Selling Your Assignment Condo

Trying to resell your preconstruction condo before closing? This blog is for you. Assignment sales are more complicated compared to their resale counterparts, but with some guidance, the process is easy.

An assignment sale is a sale where the original buyers of a condo or home resell their contract to another buyer before closing. The most common type of assignment is a preconstruction condo assignment. Preconstruction condo assignments are prevalent because of the time lag between purchasing the home and the move-in date. While condo assignments might be the most popular type of assignment, any real estate contract is assignable. This blog is going to discuss condo assignments since they are the most prevalent, but *most* of the details apply to assigning a home or commercial preconstruction property as well.

In the GTA, our preconstruction market is booming. Toronto alone sees around 30,000 new home completions a year. Around 70% of preconstruction purchasers are investors. The remaining 30% of buyers are end-users who plan to use the property themselves. However, many investors, and end-users, might decide to sell the property before the final closing. Since there is no title to transfer, these buyers have to assign their contract to the next buyer.

What is a preconstruction condo assignment sale?

An assignment is when the original buyers of a preconstruction condo decide to sell their contract with the builder to another buyer before the home is complete. This differs from a regular real estate transaction because we are not buying or selling a home, rather we are buying or selling an interest in a contract to purchase a home once it’s complete. Essentially, the buyers are taking over the seller’s place in the contract with the builder. The new buyer pays the seller their deposits back, as well as any profit. In trying times, there might not be profit, and in extreme cases, the sellers might walk away from their deposits.

Assignments are like the wild-west equivalent of real estate. The buyers are called assignees, the sellers are called assignors, and there is no fixed closing date! You heard that right, the buyer purchases the contract not knowing whether it will close in 4 weeks, 6 weeks, or 8 weeks. In many cases, the buyers only have a rough estimate for the final closing of the property as well.

Every builder’s agreement of purchase and sale is different, so every assignment sale is different. You need legal and accounting advice before, during, and after an assignment sale. A real estate agent’s job in the transaction is to find a buyer, negotiate the contract, and coordinate the sale from start to finish. Your real estate agent might also connect you with accountants, and lawyers who can help make the necessary legal and tax declarations.

The Builder’s Role In Assignments:

Sellers often misinterpret their rights to assign in their purchase agreements with their builder. In the showroom, builders are quick to say their contract is assignable if you want to flip your contract before closing. However, builders can control when, how, and to whom you sell your contract.

It’s important to follow the rules set out by your builder when marketing your assignment. Deviating from the builder’s purchase contract can result in you losing your deposits!

Since all preconstruction home assignments require the builder’s consent, it’s important to prepare the file for their consent at your earliest convenience. The builder will want the same information they collected from you when you first purchased the home: full names, current address, sin, IDs (front and back), telephone number, emails, mortgage pre-approval letter, lawyer information… they will also want the buyer to replace all your cheques. Those could be cheques for future deposits, or cheques for interim occupancy fees. It’s important to advise the buyers to prepare all of this information before submitting the file to the builder, so there is limited delay assigning the property.

How do you sell an assignment condo?

The first step to selling your assignment is to review your original purchase agreement. The builder’s purchase agreement outlines restrictions and fees associated with assignments. An experienced realtor or lawyer can also review the contract with you. Next, email your builder’s customer service account and ask for permission to advertise the property for sale.

It’s important to thoroughly understand your preconstruction agreement, because some incentives offered to you might not be transferable to the buyer. Builders often offer incentives to direct buyers to stimulate sales. However, they sometimes make these incentives non-transferable. That could mean the free design dollars, or the capped development levies might not be available to the next buyer. It’s important not to advertise incentives that aren’t transferable.

The second step is to hire a Realtor to advise you on current market conditions. Your realtor will discuss marketing options as well as help you decide on a market price. There is a strong chance the builder will prohibit MLS listings of their properties. However, many builders will allow online marketing in places like Facebook, Instagram, WhatsApp, and brokerage websites.

While Realtor.ca is the best marketing platform out there, buyers looking for assignments know to look elsewhere. Don’t worry if you cannot market on realtor.ca. One of the advantages of Sotheby’s International Realty Canada is our vast marketing platform outside of Realtor.ca

Important Dates:

The first date you need to consider is the assignment closing date. This is the date the assignee officially takes over the contract from the assignor. On average, assignment closing happens within 3-6 weeks after an offer is accepted. This is when the assignee becomes the new owner of the property, and the assignee receives some of their deposit/profit back.

The second date to consider is the interim occupancy date. When buying preconstruction condos, there is usually a period between when the unit is ready for occupancy and before the building has registered with the city. Since no title exists yet, you cannot get a mortgage. Instead, during this time, you move in and pay the builder rent until final closing. Interim occupancy can last from months to years. During interim occupancy, buyers have the chance to view the unit which could help sell the home. Interim occupancy is when most assignment sales take place.

The third date you need to know is the final closing date. This is the date that the building registers with the city and the assignee pays the builder the balance of the purchase price, land transfer taxes, closing costs etc. Sometimes, assignees will negotiate to pay some of the assignors profit on final closing date, so they can roll it into the mortgage.

What Is Negotiable During An Assignment Sale:

Since the contract with the builder is already firm and binding, there can be no changes to that contract. The buyer is merely stepping into the seller’s shoes, in exchange for their deposits and profits. The assignment contract negotiates the purchase price and the deposit structure. The purchase price will indicate how much profit (or loss) the assignor receives in the transaction.

The payment schedule of an assignment is dependent on whether there is a profit or not. If the seller is making a profit or breaking even, then the buyers are expected to refund the full deposit paid-to-date by the sellers. In many cases, that is 20% of the original purchase price. If the seller is losing money on the assignment, then the buyers will bring a deposit for less than the deposits already paid to the seller. The deposit is due upon acceptance of the offer.

If there is profit, the assignee and assignor will negotiate when that profit is paid out. Remember when we mentioned the three important dates? the assignment closing, the interim occupancy date, and the final closing date? well, when it comes to negotiating when to pay the assignor their profit, we usually pick one of these dates to pay out the assignor’s profit.

The expected final closing is an important consideration for buyers when negotiating when to pay the assignor’s profit. The longer the final closing date, the more risk for the buyer. The reason? there is always a small risk the condo developer cancels the project. If a condo developer cancels the project, the buyers are returned their deposits paid-to-date. However, if a buyer has paid an assignor $100,000 in profit, that money is gone. So if there is a long closing, expect buyers to protect their final deposits by delaying it till interim occupancy, or final closing.

Conditions In Assignment Sales

After finding a buyer, the first hurdle to overcome is negotiating a fair deal. Once both parties are satisfied with the terms of the contract, we make the deal conditional on the lawyer’s review. This gives both the buyer and seller a chance to have the assignment contract, as well as the original purchase agreement, reviewed by a lawyer. Once both parties have spoken to their lawyers and are happy to continue, we put the deal to the developer to approve the new buyer. This condition usually lasts around 30 days. If the developer does not approve the new buyer within 30 days, the deal will become null and void, unless the buyer and seller both agree to extend that condition.

Once the developer accepts the buyer, the assignment will happen within a few days. Most contracts outline an assignment closing within 5 business days after the developer gives their consent. Some buyers will also include financing conditions in their assignment offer, so they have time to run the deal past their mortgage broker. However, most assignments are purchased with only lawyer review and developer consent conditions.

Here’s an example of selling an assignment for profit vs selling an assignment for a loss:

Below are four examples of the deposit/profit payment schedule for assignments.

Example 1 is a fantastic example of a preconstruction condo that appreciated $100,000. In this typical example, the assignee and assignor agreed to a deposit big enough to return all of the assignor’s deposits, as well as some extra profit to cover Realtor commissions. This deposit is usually transferred to the listing brokerage within 1 day of the offer being accepted and is released to the assignor on assignment closing. In this example, the assignor and assignee also agreed to pay the seller the rest of their profit at the final closing.

Example 2 shows the same conditions for the sale, except the assignee agreed to pay the assignor their full deposit and all their profit on the assignment closing date, instead of the final closing date.

Example 3 looks at an assignment where the assignor is taking a $100,000 loss. Instead of being paid their whole deposit on assignment closing, they are paid their deposit minus the difference between the purchase price and the sale price.

Example 4 is a rare case, where the market has turned significantly and the assignor is looking to transfer their assignment for $0. This means the assignor is walking away from all their deposits and will take no money to transfer their contract to the assignee.

What Does It Cost To Sell An Assignment condo:

The major fees when selling an assignment include the builder’s assignment fee, real estate commissions, and tax on the profit. Builder’s assignment fees usually range from $1500-$25,000 (in some extreme cases they go as high as $80,000). The assignor usually pays both the assignor and the assignee’s realtor commissions. The commission is something to negotiate with your agent. The total commission is usually 5% or less of the final sale price. There are likely taxes such as income tax, capital gains tax, or HST on the sale as well. Speak to your accountant about taxes due on the assignment sale.

Taxes due on an assignment sale:

The taxes on assignments are simple, however, buyers and sellers often confuse the HST taxes. That’s because there are two different HST taxes when talking about preconstruction assignments. Let’s clarify this! All new homes are subject to HST, however, end-users don’t notice the HST tax because the builder pays it and claims a $24,000 rebate on the end-user’s behalf. Alternatively, investors who purchase a pre-construction home are charged around $24,000 in HST, and are then able to claim a rebate for the HST they paid, if they rent the property out for one year. There are situations where an assignment will lose its eligibility for the HST rebate. If someone has lived in the home during interim occupancy, it will no longer be eligible for the end-user HST rebate.

The second HST tax we discuss when selling an assignment is the HST due on the profit. In many cases, the profit is subject to a 13% HST tax. In some cases, even the return of deposits is subject to HST.

The third tax is the income or capital gains tax on the profit. Any real estate property that is not your primary residence, as well as any business venture, is taxable as either a capital gain or as income. It’s really important to speak to an accountant before selling your assignment. Only an accountant can advise you whether you owe HST, capital taxes, or income taxes on your assignment sale.

Is it better to sell an assignment or wait till the condo is ready?

The pros to assigning a condo:

Receive your deposits and profit sooner
Avoid market risks. Savvy investors might look to assign their property if they sense the market might depreciate in the coming months/years.
Avoid paying closing costs (land transfer taxes, development levies, utility hookups, and more). These usually come to a little more than 5.5% of the purchase price
No mortgage or financing required
Minimize holding costs (if you sell before interim occupancy or before final closing, there are no property taxes, maintenance fees, utility fees, insurance, mortgage, etc)

Cons to assigning a condo

Developer restrictions (limiting the marketing of the property, limiting when they are accepting assignments)
Market perception and buyer’s hesitancy when buying a property sight-unseen
Market fluctuations suppressing buyer demand
Limited buyer pool and most of the buyers are investors who want a good deal
Usually sell for a lower price than comparable resale properties
Financing challenges for the buyer if the property does not appraise at the new purchase price
Potentially more taxes compared to closing and reselling

The most common mistakes when selling an assignment:

Hiring the wrong representation, or not relying on professional advice:.

As active realtors in the assignment market, we come across quite a few mistakes. But most of them could be avoided if the buyers and sellers were represented by experienced realtors and lawyers. The agreement of purchase and sale for an assignment is very different compared to an agreement of purchase and sale for a resale home. One of the most common mistakes we see from buyers and sellers is assuming the paperwork their realtors drafted is correct, and forgoeing their right to have their lawyer review the assignment paperwork.

Poor communication/understanding:

This happened to my assignment buyers recently. They purchased a home where the seller’s representative told us the finishes had not been chosen yet. We protected our buyers by including clauses to that degree. However, a few days after the assignment closing, we learned the sellers chose the finishes a few days before closing. Luckily, the developer allowed the buyer to make changes to the finishes at an additional fee.

Ignoring deadlines or dragging your feet:

Assignments come with a lot of moving deadlines, and there are a lot more parties involved compared to a resale property. Always return paperwork and signatures as soon as possible. Compared to a resale property where the only parties are the buyer, seller, and their agents and lawyers, an assignment involves the developer, the developer’s lawyers, the buyer and seller agents, and the buyer and seller lawyers. If everyone took 3 days to return paperwork, the conditional period would lapse and the deal would become null and void.

Incomplete Buyer Vetting:

Buying an assignment requires the assignee to have their mortgage preapproval, as well as their purchase funds available very shortly. If the assignee does not have a mortgage preapproval on hand, it could delay the developer accepting the assignment. If they do not have their funds available it could delay the quick closing as well.

It’s important to thoroughly vet buyers because some builders require the assignor to close in the rare chance the assignee cannot close.

Misunderstanding fees:

Builder’s contracts are not standard forms, and their deposit structures and closing fees can vary from site to site. There are a lot of potential fees when buying and selling assignments and they include, but are not limited to: deposits, seller’s profits, upgrades, lawyer’s fees, interim occupancy rent, utility set-up fees, development levies, realtor commissions, accountant fees, HST, and income taxes. These fees can vary from deal to deal, and when they are payable is different in every assignment. For example, some developers require the homeowner to pay for upgrades when they are chosen, and others charge for the upgrades at final closing.

If you have a preconstruction condo or home that you are thinking of assigning. Feel free to reach out to us for some advice and insight.

6 important facts to consider when selling a preconstruction condo.

Everything you need to know to sell your preconstruction condo assignment

Selling your pre-construction assignment in the current market

Many preconstruction buyers are facing the realities of a shifting real estate market, especially those who have purchased preconstruction properties, specifically for assignment. Last quarter was the worst quarter for new condo sales since the financial crisis and this past July, Condo sales in Toronto hit a 23-year record low. Toronto Condominiums accounted for 828 units sold in July, down 39 per cent from July 2022 and 50 per cent below the 10-year average. An assignment is typically a transaction where a purchaser buys a unit from a developer and sells the purchase contract to another buyer prior to closing.

Essentially, it’s the paperwork trading hands, for a profit. Assignment sales are also usually not listed on public platforms such as MLS and are conducted privately between agents. An assignment sale in real estate refers to the transfer of a purchase agreement from the original buyer (assignor) to a new buyer (assignee) before the completion of the property.

In this type of transaction, the assignor essentially sells their rights and obligations under the original purchase agreement to the assignee. The assignee steps into the assignor's position and assumes the responsibility of completing the purchase and taking ownership of the property. Assignments can occur in both pre-construction and resale properties and can provide opportunities for buyers to purchase a property before its completion or for sellers to exit a purchase agreement before closing. Assignments used to be a hot segment for speculators buying preconstruction projects as prices in major Canadian markets like Toronto, Vancouver, and Calgary saw record price appreciation during the pandemic. With rising interest rates and price drops in Canadian Real Estate, assignment sellers are now finding themselves in a very difficult situation .

In recent years, part of the attraction to assignment sales for real estate investors has been the fact that they only need to put the deposit down rather than have full mortgage financing activated. The contract is typically sold well before closing and the investor doesn’t need to deal with closing the property, avoiding closing costs, getting a mortgage, and holding the property. With consumer confidence at record lows, the buyer pool for assignments has shrunk significantly, leaving preconstruction investors in a lurch as their closing dates approach. If you purchased a preconstruction home or unit with plans to assign the unit, here is what we’ve typically seen transpire in recent months.

Challenges with closing preconstruction assignments

Potential default on closing preconstruction assignments.

If you cannot successfully assign your pre-construction purchase contract, you're still liable to close on the property, as per your agreement with the developer. Failing to close may mean breaching your agreement and can lead to the loss of your deposit and potential litigation from your developer, where a court can find you to also be liable for the difference between your agreed purchase price to the current market value, plus legal fees incurred by your developer.

Qualifying for a mortgage at a higher interest rate

Unless you have access to cash to pay in full and close your purchase, you will likely need to qualify for a mortgage to satisfy the purchase price and closing costs. Since most preconstruction purchase contracts were signed in a low-interest-rate environment, qualifying for a mortgage can become a challenge. With current rates and the stress-test, most buyers need to qualify at 8-9% interest rates, leading some buyers to seek other financing options such as private financing or alternative lenders, which typically come in at higher rates and fees to account for the added risk.

Appraisals coming in lower

If you can qualify for a mortgage, most lenders will request that an appraisal be performed on the property prior to approving your mortgage. This is where your appraisal can potentially come in lower than what you have agreed to purchase the property for. Every lender has their loan-to-value (LTV) ratios in place and when an appraisal comes in lower, they will only lend to up to that LTV. For example, if you purchased a condo unit for $800K two years ago and assumed you are getting a mortgage at 75% LTV, your plan was for a lender to finance $600K, with the remaining funds coming from you. Let’s assume the appraiser determines that in today’s market, your unit is only worth $700K. Your lender will now only lend you up to $525K, leaving you to come up with an additional $75K in order to close. Appraisals coming in below purchase value have become more common recently.

Selling the assignment at cost or below purchase price

With current market conditions, selling an assignment for a profit may be considerably more challenging. Both investors and end-users who are would-be purchasers of assignments are no longer in the market, leaving a limited pool of investors who are on the lookout for great deals. Some developers have even lowered their current prices to attract new buyers and may be competing with your assignment. In some cases, selling your assignment at a slight loss may be a better option than defaulting on your closing. If you agree to sell your assignment at the original purchase price or below it, it means you still must cover Real Estate Commissions (since you cannot list your assignment on MLS, most assignment deals are done privately between agents), and legal fees. Depending on the circumstance, you may essentially "pay" the buyer to take on the assignment. Compared to defaulting on your purchase agreement and facing litigation, selling at a slight loss might be a viable option if you are not able to close or rent out the unit.

Closing and renting

Many buyers are opting to close their pre-construction property and wait out the market by renting the property for a while. One thing to keep in mind is that you may not be the only one with the same idea. Other owners in a building or the area may be looking to rent at the same time, creating an influx of rental inventory, which may reduce the rental pool and rental prices. If you are purchasing a condo, you’ll need to check your agreement as to whether you are allowed to legally rent during the interim occupancy period. Depending on how long you plan to keep your property rented, or vacant, you’ll need to be mindful of new regulations coming into effect in 2023 such as the Toronto Vacant Home Tax and the Federal Government’s anti-flipping laws .

The bottom line

The short-term outlook for the preconstruction and assignment market isn’t a great one. If you plan to assign a preconstruction property, you need the right financial and legal advice to understand all of your options prior to making a decision. Make sure you speak to your Real Estate Agent, Mortgage Broker and Lawyer to clearly understand your options and how to navigate your situation.

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What is a Pre-Construction Assignment Sale?

The transfer of a pre-construction contract from the original purchaser t o a new buyer before possession of the unit is taken is called an assignment sale.

John Smith decides to buy a new home in the pre-construction phase in Toronto . The Agreement of Purchase and Sale is for the purchase of the contract for his new home, not the physical unit, since it ha sn’t been built or registered yet.

John Smith purchases a one-bedroom condo unit within a 25 storey pre-construction condo building that is estimated to be completed in 4 years.

The developer has included a clause within the Agreement of Purchase and Sale allowing John to sell and transfer the contract for the pre-construction one-bedroom unit to a new buyer before he has to take occupancy if need be .

During those 4 years John Smith meets the love of his life and decides to get married, hav e a child and start a whole new life together. All of a sudden, he no longer has a need for that one-bedroom unit in the condo building that is now under construction. What can he do?

One option is to transfer the contract for his condo unit to a new buyer before occupancy occurs. This is called a pre-construction assignment sale . The assignor , (John Smith) who is the original pre-construction purchaser and now looking to sell, will find a new buyer , the assignee, (Jane Doe) to purchase the pre-construction contract. Jane Doe will now become the legal owner of the aforementioned one-bedroom condo and all legal responsibilities and costs pertaining to the pre-construction unit are now her responsibility.

It is strongly advisable that both John Smith and Jane Doe seek the advice of a realtor and lawyer that specialize in these types of sales to help guide them both through th e process.

John Smith can now avoid pay ing final closing costs, helping him to potentially save thousands of dollars and maybe even walking away earning a profit off the sale. However, John Smith will have to pay a small fee back to the developer , according to whatever costs are outlined in the Agreement of Purchase and Sale in order for this transaction to occur.

And Jane Doe is now the proud owner of a brand new, never lived in one-bedroom condo unit of her dreams , taking over all costs and obligations related to the contract and the pre-construction condo unit in question .

As Toronto, the GTA, and the communities surrounding these areas continue to increase in population, the production of more high-rise residential developments have also increased right alongside.

Buying real estate in the pre-construction phase has helped propel local real estate markets. Lower price points and the possibility of building up equity before even setting foot in your new home is appealing to most homebuyers looking to invest in real estate.

CondoNow and our Certified Experts can help you find the home of your dreams through a n assignment sale. We are here to help you every step of the way and answer any more questions you may have.

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Law Information Made Easy

Selling a Pre-Construction Property via an Assignment?

In one of our recent blogs we had outlined some issues in relation to purchasing a property via an Assignment. http://www.kormans.ca/purchasing-a-property-via-an-assignment/

In this blog post, we will cover a few aspects of selling a pre-construction property via an Assignment and why it is crucial to have a lawyer who is well versed in Assignments represent you with regards to same.

For those of you who are unfamiliar with the concept, an Assignment of an Agreement of Purchase and Sale with a Builder (APS) is when the original Buyer of the said APS decides to sell their right to purchase the subject property from the Builder to a potential new Buyer.

In such scenarios the Builder is referred to as the Seller; the original Buyer is referred to as the Assignor; and the potential new Buyer is referred to as the Assignee.

Often it can take a few years for a pre-construction property to be ready for occupancy from the time when the original Buyer signed the APS. Life circumstances for a Buyer may change in this timespan such as relocation due to a job, family planning; financial constraints, or they just don’t feel comfortable in proceeding with the transaction any longer.

While in a position such as this it would be ideal to just snap your fingers and wish yourself out of the situation, unfortunately the APS signed with the Builder at this point is a firm deal and the Buyer is contractually bound.

An Assignment of the APS to an Assignee is an ideal solution in such circumstances and as a bonus can often even result in the Assignor making some profit by selling their APS to an Assignee.

However, the right to assign the APS is not automatic. At the very least it is contingent on the consent of the Builder. To ensure the right to assign is included in your pre-construction APS, it is very essential that you have the APS reviewed by a lawyer within the ‘cooling off’ period if the property is a condominium, or during a conditional period in the APS. http://www.kormans.ca/pre-construction-contracts-why-it-is-essential-for-a-lawyer-to-review/

The Assignor and the Assignee sign a contract between themselves outlining the terms related to the Assignment. Some of the key items covered in this contract include but are not limited to the price, deposit structure, possession of the property if the Occupancy Closing has already taken place, additional representations and warranties, tax issues, and more.

For professional legal advice on detailed aspects of an Assignment sale, please contact one of our lawyers via email and/or telephone and we would be more than happy to assist you! http://www.kormans.ca/about/

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Questions regarding your property?

An assignment is when the original Buyer of a Pre Construction home (i.e. Towhnome, Condo, Detached House) sells their rights

to a finished home to another Buyer before that home is completed.

The reason the word “Assignment” is used is that the original Buyer Assigns their rights in the sale over to the new Buyer.

The Seller of an assignment is the Assignor and the Buyer of an Assignment is the Assignee.

Mpire Realty Investments is now available to help with the purchase and sale of Pre-Construction Townhome/Condo Assignments in the GTA. We have the experience, tools, and connections to give your pre-construction assignment townhome/condo the exposure it needs to sell for top dollar.

Likewise, for buyers, we have the experience, resources, and relationships to get you the best possible deal when purchasing

a pre-construction assignment contract in GTA. Sign up for more information!

Glenway Urban Towns by Andrin Homes - Assignment Sale - Mpire Realty Investments Assignment Sales, 2 Bed 2 Bath Townhome, Pre-Construction Townhouse, Assignment Sale Newmarket, Ontario, Townhomes in $700000's

GLENWAY URBAN TOWNS - $760,000 (incl. over $17K of Upgra des )

NEWMARKET - ASSIGNMENT - NOW SELLING

ADDRESS: Bathurst St & Davis Dr W

UNIT: 2A Model - 2 Bedrooms , 2 Bath

with 1 Parking

AREA: 914 Sq Ft

OCCUPANCY: AUGUST 2024

DEVELOPER: Andrin Homes

Glenway Urban Townhomes By Andrin Is Located In A Prime New Market Location Minutes To All Amenities. 2 Bed & 2 Bath, Boasting An Open Concept On The Main Floor Layout With Walk-Out To The Balcony From The Living Room. Main Bedrooms Includes Walk-In Closet & Kitchen Offers Stainless Steel Appliances. Over $17K Worth Of Upgrades Including: Smooth Ceiling & Pot Lights Throughout, Moen Faucets In The Bathroom/Kitchen, Doors, Cabinetry In Kitchen, Red Oak Handrails And More!

Glenway Urban Towns, Newmarket, 2B Model with Terrace, Assignment Sale $850,000.jpg

GLENWAY URBAN TOWNS - $850,000 (incl. over $ 2,400.00 of Upgra des )

UNIT: 2B Model - 2 Bedrooms , 2 Bath, Rooftop Terrace

AREA: 1235 Sq Ft

OCCUPANCY: SEPTEMBER 2024

Part of the Glenway Urban Towns Community, 3 Level Townhome is bright, airy and expansive while underlined with thoughtful design and features. This 2B Floorplan is spacious consisting of 2 Bed, 2 Bath, a private Rooftop Terrace and 1 Underground Parking Stall. Glenway Urban Townhomes By Andrin Is Located In A Prime New Market Location Minutes To All Amenities. A highly desirable unit, the Open Floor Layout also has a Walk-Out To The Balcony From The Living Room. Main Bedrooms Includes Walk-In Closet & Kitchen Offers Stainless Steel Appliances with additional upgrades.

Dunwest Condos in Oakville, Ontario, Assignment Sale, Mpire Realty Investments, .jpeg

DUNWEST CONDOS- $900,000

OAKVILLE - ASSIGNMENT - NOW SELLING

ADDRESS: 509 Dundas Street West

UNIT: 2 Bedrooms + Den – SW, 4th Floor

with 1 Parking & 1 Locker

AREA: 1063 (Interior 999, Exterior 64 Sq Ft)

OCCUPANCY: JUNE 2023

DEVELOPER: Green Park Group

Located at Dundas Street West and Neyagawa Boulevard, Dunwest Condo is situated within the wonderful New Oakville community. A city vibe intersects with the beautiful greenery Oakville is known for to create a wonderful backdrop. Enjoy urban conveniences within minutes including grocery stores, banks, retail shops, restaurants and so much more. You will also be in the midst of serene parks as well as the Sixteen Mile Creek which runs throughout Oakville. Enjoy the best Oakville has to offer at Dunwest Condo.

Verde Condos right across from the well-known Fairview Mall. Be close to the Don Mills Sub

VERDE CONDOS- $400,000

ADDRESS: 188 Fairview Mall Drive, Toronto, ON.

UNIT: Studio– SW, 20th Floor N, with 1 Locker & NO Parking

AREA: 430 (Interior 375, Exterior 55 Sq Ft)

OCCUPANCY: - SOLD

DEVELOPER: Fram Building Group

Verde Condos right across from the well-known Fairview Mall. Be close to the Don Mills Subway station, the highway, shopping, restaurants, schools, Seneca College and so much more!

Introducing The Queensview, VANDYK's second residential condominium at Backyard Neighbourhood Condos in South Etobicoke. A rare opportunity awaits to discover what matters most in life. Inspired living spaces. Authentic sense of community. Naturally beautiful surroundings. Backyard Condos blend contemporary living with yesterday’s pace and values. Real and simple - just like it used to be!.png

QUEENSVIEW at BACKYARD CONDOS - $779,990

ETOBICOKE - ASSIGNMENT - NOW SELLING

ADDRESS: 25 Neighbourhood Ln.Etobicoke, ON

UNIT: 2 Bedrooms + Den, 2 Bath – SW, 5th Floor

with 1 Parking (additional can be purchased for $55,000) & 1 Locker

AREA: 1042 sq. ft.

DEVELOPER: Vandyk Group of Companies

Introducing The Queensview, VANDYK's second residential condominium at Backyard Neighbourhood Condos in South Etobicoke. A rare opportunity awaits to discover what matters most in life. Inspired living spaces. Authentic sense of community. Naturally beautiful surroundings. Backyard Condos blend contemporary living with yesterday’s pace and values. Real and simple - just like it used to be!

Transit City 5 Condos, Vaughan, Ontario , Pre-Construction Assignment Sale, Mpire Realty I

TC5 CONDOS- $499,000

VAUGHAN - ASSIGNMENT - NOW SELLING

ADDRESS: 7890 Jane St, Vaughan, ON.

UNIT: 1 Bedroom, 1 Bath, 11th Floor

no parking/locker

AREA: 483 sq. ft. w/ 107 exterior

OCCUPANCY: October 2023

DEVELOPER: CENTERCOURT

TC4 + TC5 are the place for people going places. Steps from the TTC subway station and regional bus terminal, every place is just minutes from here. Whether it's your downtown job, class at York U, movie at TIFF, or a shopping spree at Yorkdale, the city is a quick and easy ride away. If you choose to go another direction, for samosas in Brampton or dim sum in Richmond Hill, hop onto the Zum, Viva or YRT buses that stop at your doorstep. And when you want to go even further, simply hit any of the major highways that are just around the corner. TC4 + TC5 are an exceptional addition to a phenomenal master-planned community, Smartcentres Place. Steps from top notch employers, a 9-acre central park, a YMCA, and library among other necessities and conveniences, it sits in the centre of a connected universe.

TC4 CONDOS- $669,990

UNIT: 1 Bedroom plus Den 2 Bath, 41st Floor

with 1 Parking & 1 Locker

AREA: 597 sq. ft. plus Balcony

Tretti Condos, Toronto, Assignment Sale, Mpire Realty Investments.jpeg

TRETTI CONDOS- $715,000

ADDRESS: 30 Tippett Road, Toronto, ON.

UNIT: 2 Bedrooms, 2 Bath, 13th Floor

- No Parking & No Locker

AREA: 673 sq. ft. (Interior 553, Exterior 120 Sq Ft)

OCCUPANCY: - SOLD

DEVELOPER: Collectdev

Welcome to TRETTI, a fully formed community with one simple vision: create a lifestyle designed for the way people really live. Suites with clean lines and multi-functional design. A blank canvas in Toronto’s Tippett Regeneration Area doubles as the testing ground for a new, complete way of living. TRETTI is a social, environmental and experiential strategy of city-building that adopts the best practices of northern European design. Introducing an eco-friendly, affordable, and human-scaled lifestyle to the heart of Wilson Heights, TRETTI captures the progressive ideals that have made Scandinavian cities some of the happiest on the planet, employing an acute focus on placemaking to create an egalitarian, hyperlocal and truly complete community.

Victoria_Garden, Finch and Victoria Park, Mpire Realty Investments, Assignment Sales, Top

VICTORIA GARDEN - $575,990

ADDRESS: Victoria Park Avenue & Finch Avenue East, Toronto, ON.

UNIT: STACKED TOWNHOME - 1 Bedroom plus Den,

1 Bath, 1st Floor with 1 Parking & 1 Locker

AREA: 600 sq. ft. w/ 209 exterior

DEVELOPER: 95 Development

At Victoria Garden, you can go everywhere within minutes. In a setting surrounded by opportunities to work, play and discover, the concept of community has seamlessly emerged. Victoria Garden is the perfect balance of accessibility, quality and comfort. When it is time to play, you can connect to other over shared interest at the local market, the library or the nearby Chester Le Park. When it is time for some retail therapy, you are minutes away from the Bridlewood Mall, and when it is time to venture outside of your neighborhood, Victoria Garden provided a gateway to the everywhere via the Highway 401 and 404.

VICTORIA GARDEN - $830,000

UNIT: STACKED TOWNHOME - 3 Bedroom, 2 Bath, 2nd Floor

with 1 Parking & 1 Locker

AREA:

OCCUPANCY: MID 2023

Assignments sale, 3 storey townhouse, townhome, Bowmanville, Ontario, real estate property

Edenn Town - $888K

BOWMANVILLE - ASSIGNMENT - SOLD

Edenn Town Collection is a new townhouse development by Treasure Hill Homes at Middle Road & Northglen Boulevard, Bowmanville. The development will be completed in 2022. Edenn Town Collection has a total of 33 units. Sizes range from 1615 to 1878 square feet.

Urban North Towns in Barrie, Ontario, Freehold Townhomes, Starting $600K, Investment Prope

Urban North Townhomes - Starting $700K

BARRIE - REGISTER FOR ASSIGNMENT SALES

Urban North is a community designed with convenience in mind. Live steps from the Barrie South GO Train, close proximity to Lake Simcoe, water activities, beautiful parks, playgrounds, trails along with skiing and snowboarding at Blue mountain & Horseshoe valley! Community living for more than 850 families in this beautiful, sought-out Master plan neighbourhod.

Pre-Construction Assignment Sale FAQ

Q: What is an Assignment Sale?

A: An assignment sale is the sale of the contract for a newly built or still under construction condo unit or home.

Q: Why do Assignment Sales Occur?

A: Because it usually takes several years to completely build a pre-construction condo building or new home, things in someone’s life can change during that time leading to them no longer needing or wanting the home.

Q: Are Assignment Sales Legal?

A: Yes, assignment sales are legal. Developers will usually include a clause wit hin the original Agreement of Purchase and Sale.

Q: Who is the Assignor?

A: The Assignor is the original purchaser of the Agreement of Purchase and Sale from the developer.

Q: Who is the Assignee?

A: The Assignee is the purchaser of the Agreement of Purchase and Sale from the Assignor.

Q: What is the Assignor Responsible For?

A: The Assignor will usually have to pay a small fee back to the developer and a legal fee if they choose to assign their purchase. These costs will be outlined within the Purchase of Agreement and Sale. Also if for some reason the Assignee does not close the sale at final closing. The Assignor may still be on the hook for the contract.

Q: What is the Assignee Responsible For?

A: The Assignee is now responsible for any and all fees and charges related to the contract; deposits, charges, occupancy fees, closing costs, etc.

Q: How does an Assignment Sale Benefit the Assignor (Original Purchaser)?

A: Depending on how much time has passed and how much the land has appreciated the Assignor may make a profit off of his original purchase.

Q: How does an Assignment Sale B enefit the Assignee (New Buyer)?

A: When the Assignee takes over the contract for the home in question, they will inherit any incentives that were included with the original purchase and will not have to wait years to move into a brand new, never lived in home.

Q: Should I Seek the Advice of a Lawyer During This Process?

A: Whether you are the Assignor or Assignee, it is always essential to seek the expertise of a lawyer that specializes in real estate to look over any and all paperwork and contracts and help you navigate through any legal jargon you may not understand.

Q: Where Can I Find Available Assignment Sales?

A: Most Assignment Sales won’t be found through MLS listings, so if you are interested in finding your dream home through an Assignment Sale, your best bet is to contact a Mpire Realty Investments Expert today. We specialize in pre-construction builds and are thoroughly educated in Assignment Sales and can answer any questions you have.

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Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit

From: Canada Revenue Agency

Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change. For more information about the legislative amendment, refer to GST/HST Notice 323, Proposed GST/HST Treatment of Assignment Sales .

GST/HST Info Sheet GI-120 July 2011

This info sheet explains how the GST/HST applies to the assignment of a purchase and sale agreement for the construction and sale of a new house.

The term "new house" used in this info sheet refers to a newly constructed or substantially renovated house or condominium unit. A house that has been substantially renovated is generally given the same treatment under the GST/HST as a newly constructed house. Extensive modifications must be made to a previously occupied house in order to meet the definition of a "substantial renovation" for GST/HST purposes. For a full explanation of the factors to consider in deciding if a substantial renovation has taken place, refer to GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate .

In this publication, a house includes a single unit house, a semi detached house, a duplex, a rowhouse unit and a residential condominium unit (condo unit), but does not include a mobile home or floating home.

Where a person enters into a purchase and sale agreement with a builder for the construction and sale of a new house, the person may be entitled to assign their rights and obligations under the agreement to another person (an assignee). Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee.

This publication addresses the situation where

a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.

Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.

For GST/HST purposes, the term "builder" is specifically defined and is not limited to a person who physically constructs a house. There are several instances in which an individual or other person is a builder for GST/HST purposes. For more information on persons who are included in the definition of "builder", refer to GST/HST Memorandum 19.2, Residential Real Property .

This info sheet addresses only whether a person is a builder as described in the following paragraph.

Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances

A builder includes a person who acquires an interest in a new house before it has been occupied by an individual as a place of residence or lodging for the primary purpose of selling the house or an interest in the house or leasing the house, other than to an individual who is acquiring the house otherwise than in the course of a business or adventure or concern in the nature of trade. When that person is an individual, the individual must acquire the interest in the course of a business or an adventure or concern in the nature of trade in order to be a builder described by this paragraph.

Even if a person is not a builder as described in the preceding paragraph, the person may be a builder based on one of the other definitions of the term as described in GST/HST Memorandum 19.2.

Assignment of a purchase and sale agreement by a person other than an individual

Where a person other than an individual (e.g., a corporation) is a builder as described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances" and the person assigns a purchase and sale agreement for a new house, the person's sale of the interest in the house is subject to the GST/HST whether the sale takes place in the course of a business, an adventure or concern in the nature of trade, or otherwise.

Assignment of a purchase and sale agreement by an individual

If an individual enters into a purchase and sale agreement for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the sale of the interest in the house (or the house itself) is normally considered to be made in the course of an adventure or concern in the nature of trade or, depending on all of the surrounding circumstances, in the course of a business. If it is established that an individual is selling an interest in a new house in the course of a business or adventure or concern in the nature of trade, the individual is considered to have entered into the purchase and sale agreement for the primary purpose of selling the house or an interest in the house.

Whether the activity of acquiring an interest in a house, as a result of entering into a purchase and sale agreement, is done in the course of a business or an adventure or concern in the nature of trade is a question of fact. For more information on how to determine whether an activity is done in the course of a business or an adventure or concern in the nature of trade, refer to Appendix C of GST/HST Memorandum 19.5, Land and Associated Real Property .

Factors in determining the primary purpose

All of the relevant factors surrounding entering into a purchase and sale agreement should be considered in determining the primary purpose for a person's acquisition of an interest in a new house.

The following factors may indicate that, for GST/HST purposes, a person entered into a purchase and sale agreement for the primary purpose of selling an interest in the new house or the house itself. The factors are not listed in any particular order and there is no intent to weigh one more heavily than another.

The person offers to sell their interest in the house or takes other actions to attract buyers before, or while, the house is under construction.
The person finances the purchase of the house by a short-term mortgage, or an open mortgage that can be paid off without penalty, rather than by a long-term or closed mortgage.
Financing of the house is beyond the person's means and that person is relying on the increased value and saleability of the house, or an interest in the house, in a rising housing market.
The person is an individual and their stated intention to occupy the house as a place of residence is not supported by the circumstances of the case. For example, an individual has a family of four and enters into a purchase and sale agreement for a one-bedroom condo unit where they are not contemplating any changes in family circumstances.
The person's pattern of activity is such that their occupancy of the house does not have the qualities or characteristics of being permanent. For example, the person purchases more than one house at or around the same time. This factor may be given extra weight where the person has previously entered into a purchase and sale agreement for purposes of selling the house or an interest in the house. There are no outward indicators to support a contrary primary intention (i.e., an intention contrary to an intention of resale). For example, an individual is selling a condo unit, one or more of the above factors are present, there are no physical actions or evidence that the individual's primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence, and no evidence that the sale of the condo unit was triggered by some unforeseen event.

In order for the acquisition of an interest in a new house to be for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the intention to sell the house or an interest in it, or to lease the house in the manner described in that section, must have existed at the time of acquiring the interest. Nonetheless, the intention at the time of acquisition may be demonstrated over a period of time.

If an individual acquired an interest in the house for the primary purpose of using it as a place of residence, the person is not considered to be a builder of the type described in this info sheet even if, at a later point in time, the person sells the house or an interest in the house. However, the person may still be a builder if the person meets one of the other definitions of that term as described in GST/HST Memorandum 19.2.

The following examples illustrate when a person may or may not be a builder of a new house.

Sarah, Francine, and Angela are roommates renting a three-bedroom house. They entered into a purchase and sale agreement with a builder in January 2010 for a one-bedroom condo unit in a new condominium complex that was to be built. The purchase price under the agreement was $300,000 and the closing date was July 31, 2013.

In March 2011, the fair market value of the new condo unit had increased by 50%. They entertained several offers for the sale of their interest in the condo unit before assigning it to James. No individual had occupied the condo unit as a place of residence or lodging when they sold their interest in the unit. They split the proceeds, which they each used as a down payment to buy their own homes.

As it would not be practical for the three individuals to live in the condo unit together, they considered several offers for their interest in the unit, and there are no indicators to support a contrary intention, Sarah, Francine and Angela are considered to have acquired their interest in the condo unit for the primary purpose of selling the unit or an interest in it. The sale is considered to be made in the course of a business or adventure or concern in the nature of trade. Accordingly, Sarah, Francine, and Angela are all builders of the condo unit for GST/HST purposes. As they are builders of the unit and the sale of their interest in the unit is not exempt, GST/HST applies to the sale of each of their interests.

Pascal and Chantal own a four-bedroom house where they live with their three children. This is the only home they have ever owned and lived in. They have never purchased any other real property.

In June 2009, they entered into a purchase and sale agreement with a builder for a 1-bedroom condo unit in a new high-rise condominium complex that was to be built. The purchase price under the agreement was $275,000 and the closing date was June 30, 2010. In May 2010, they sold their interest in the new condo unit for $400,000 before it had been occupied by any individual as a place of residence or lodging. They used the sale proceeds to build an addition to their current home.

Although Pascal and Chantal have no history of buying and selling real property, it would not be practical for their family of five to occupy the condo unit as their place of residence. Lacking evidence to support a contrary intention, their primary purpose in acquiring the interest in the condo unit is considered to be for the purpose of selling the condo unit or an interest in it in the course of a business or an adventure or concern in the nature of trade. Accordingly, they are builders of the new condo unit for GST/HST purposes. As the sale of their interest in the unit is not exempt, GST/HST applies to the sale of their interest.

Eric and Gina owned a 3-bedroom house where they lived with their 3 children. They entered into a purchase and sale agreement with a builder in October 2010 to purchase a new 4-bedroom house that was to be built. They intended to use the new house as their primary place of residence as it was located much closer to the children's school and to Eric and Gina's workplaces and had more space. The closing date is July 31, 2011.

Eric and Gina sold their current home in January 2011 and moved into a rented home they planned to live in until their new house was ready. However, in June 2011, Gina's mother became ill and moved in with them as she was no longer able to live on her own.

Eric and Gina decided that the new house would no longer be large enough and that they would now need a house with a granny suite. They sold their interest in the new 4-bedroom house so that they could buy a bigger home that would suit their changed needs.

Eric and Gina's sale of their original home and temporary move to a rented house during the construction of the new home and their choice to purchase a home located closer to school and work support that their intention in acquiring the interest in the new house was to use the house as their primary place of residence. Given this, and the fact that their only reason for selling the interest was due to a change in personal circumstance (i.e., the new house would no longer accommodate their family's needs), they are not considered to have acquired the interest in the house for the primary purpose of selling it. Accordingly, they are not builders of the new house for GST/HST purposes and the sale of their interest in the house is exempt.

Cindy entered into a purchase and sale agreement with a builder in November 2010 for a new house that was to be built. She intended to use the house as her primary place of residence. Her new home would be located within walking distance from her workplace and would be closer to her family than the apartment she is currently renting. The closing date for the purchase is September 30, 2011.

In July 2011, Cindy's employer announced that it was relocating to another city located three hours away. To keep her current job, Cindy had to move to that city. She sold her interest in the house to John.

Since Cindy had intended to use the house as her primary place of residence and her only reason for selling her interest in the house was due to work relocation, she did not acquire the interest in the house for the primary purpose of selling it. Therefore she is not a builder of the house for GST/HST purposes and the sale of her interest in the house is exempt.

Assignment fees

The consideration charged for the sale of an interest in a house generally includes amounts that a person paid to a builder (e.g., a deposit) and that the person wants to recover when assigning their interest in the house. The sale price for the interest may also include a profit, i.e., an amount over and above amounts the person had paid to the builder. If a person's sale of their interest to an assignee purchaser is taxable, the total amount payable for the sale of the interest is subject to GST/HST, including any amount the person paid as a deposit to the builder, whether or not such an amount is separately identified.

A first purchaser enters into a purchase and sale agreement for a new house with a builder (Builder A) and pays a deposit of $10,000 at that time. The first purchaser does not make any further payments to Builder A. The first purchaser subsequently assigns the agreement to an assignee purchaser for $15,000. If the sale of the interest in the house from the first purchaser to the assignee purchaser is subject to GST/HST, tax applies to the full $15,000. This is the case even if the assignment agreement identifies that the $10,000 is a recovery of the deposit that the first purchaser paid to Builder A.

The assignment of a purchase and sale agreement for a new house may be subject to the approval of the builder with whom the first purchaser originally entered into the agreement to construct and sell the new house. The agreement may list conditions related to the first purchaser's right to assign the agreement to an assignee purchaser and, in many cases, the builder charges a fee to the first purchaser for the assignment of the agreement to another person.

The fee charged by the builder in such circumstances is generally subject to the GST/HST.

Eligibility for a GST/HST new housing rebate and provincial new housing rebate (where applicable) where a purchase and sale agreement is assigned

The GST/HST new housing rebate, and where applicable, a provincial new housing rebate, may be available for a new house purchased from a builder and for owner-built new housing. Guide RC4028, GST/HST New Housing Rebate , sets out the eligibility criteria for both types of GST/HST new housing rebates and provincial new housing rebates.

If the first purchaser (the assignor) makes a taxable sale of an interest in a house, i.e., the first purchaser is a builder and assigns the purchase and sale agreement to an assignee purchaser, the first purchaser would not be eligible for either a GST/HST new housing rebate or provincial new housing rebate as they did not acquire the house for use as their primary place of residence. Even if the sale of the interest in the house by the first purchaser is not subject to GST/HST (i.e., in situations where the first purchaser is not a builder of the house), the first purchaser would generally not be eligible for either a GST/HST new housing rebate or a provincial new housing rebate as the conditions for claiming the rebates are not met (e.g., ownership of the house would not transfer to the first purchaser, but to the assignee purchaser).

The assignee purchaser, if an individual, may be eligible for a GST/HST new housing rebate, and where applicable a provincial new housing rebate, where the assignee purchaser receives an assignment of a purchase and sale agreement for a new house. The assignee purchaser would have to meet the eligibility conditions for the rebates as set out in Guide RC4028.

Where a purchase and sale agreement for a new house is assigned, there may be two builders of the house – the original builder (Builder A) and the first purchaser (the assignor). If that is the case, an assignee purchaser would generally have to pay the GST/HST to Builder A for the purchase of the new house and to the first purchaser for the purchase of the interest in the new house.

Claiming a GST/HST new housing rebate when there is more than one builder

In some cases, the builder of a new house pays or credits the amount of the GST/HST new housing rebate, and where applicable, a provincial new housing rebate, to the purchaser of the house. In this case, the builder credits the amount of the new housing rebates to the purchaser by reducing the total amount payable for the purchase of the house by the amount of the expected rebates.

Where this happens, the purchaser and the builder have to sign Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder , and the builder has to send the form to the Canada Revenue Agency (CRA). As the purchaser receives the amount of the rebate from the builder, the builder may claim the amount as a credit against its net tax when it files its GST/HST return.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house.

In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

This info sheet does not replace the law found in the Excise Tax Act (the Act) and its regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA GST/HST rulings office for additional information. A ruling should be requested for certainty in respect of any particular GST/HST matter. Pamphlet RC4405, GST/HST Rulings – Experts in GST/HST Legislation explains how to obtain a ruling and lists the GST/HST rulings offices. If you wish to make a technical enquiry on the GST/HST by telephone, please call 1-800-959-8287.

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, you may refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .

If you are located in Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please contact Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec Web site to obtain general information.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech .

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Finding reliable pre-construction homes and condos that meet the required standards can often be a challenging task. That’s where the pre construction Homes GTA location comes into play, offering a one-stop destination for individuals seeking trustworthy and high-quality assignments. GTA Homes is the best place to live a relaxed and comfortable life; there are lots of options with amazing amenities for you. It is an amazing real estate market where you can buy and sell condo & Homes in GTA real estate market .

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The Next Move Is Yours.

Don’t know where to start ? Contact Our Team!

Nobody knows the assignment market in the GTA and southern Ontario better than me. Whether you’re looking to buy or sell, I promise to work hard on your behalf to ensure you get the best deal possible.

Sean Bhairo is a data-driven CPA and Sales Representative. Sean understands that buying or selling a home is one of the largest investment decisions you will make, and his goal is to leverage his skillset and experiences to help support these decisions.

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Tax on Assignment Sales: What You Need to Know

Real estate assignment sales and flipping pre-construction condos have become popular strategies for investors looking to make a quick return. And CRA has noticed. In this blog, I will explain two ways CRA is cracking down on pre-construction investors and what you can do to minimize your tax paid on assignment sales.

#1 – CRA May Tax Assignment Sales as Business Income

Similar to selling a resale home, you are required to report an assignment sale on your tax return and pay the necessary tax. Many real estate investors are quick to assume that the profit from an assignment sale is a capital gain.

However, CRA may tax assignment sales in two ways:

Capital gain – where only 50% of the profit is taxable
Business income – where 100% of the profit is taxable

To make its determination, CRA will consider factors such as:

What was your motive or intention in buying the property?
How long did you hold the property before selling?
Do you have a history of similar transactions?
What is your reason for selling?

Based on past court cases, we know that CRA will generally consider the profit from assignment sales to be business income unless you have a compelling explanation.

With the potential to double its tax collection, you can bet that CRA is watching this closely!

#2 – CRA May Assess GST/HST on Assignment Sales

This is probably one of the most overlooked tax implications when it comes to assignment sales.

While resale homes are generally exempt from GST/HST, you may be surprised to learn that this may not be the case with assignments.

Similar to income tax, CRA will look at your intentions in buying the property to determine whether GST/HST applies to you.

For example, you are likely considered a “builder” and will have to charge GST/HST if you assign a pre-construction unit that you bought for the purpose of flipping to make a quick profit.

And it gets worse:

Not only do you have to charge GST/HST on your profit, you also have to charge GST/HST on the deposit you recoup from the buyer!

Since most real estate contracts embed GST/HST into the sales price, this cost will likely be borne by the assignor.

Let’s look at an example:

Scenario Luca purchased a pre-construction condo unit for $450,000 a couple of years ago. He paid a deposit of $90,000 to the builder. The unit is currently worth $575,000. Luca had always planned to buy this unit as an investment and assign it for a profit. He has a personal tax rate of 50%.

On the surface, it looks like Luca stands to make a great profit. But, let’s see how that holds up:

What Can You Do to Save Tax on Assignment Sales?

Firstly, if you are unsure whether you have a capital gain or business income, you should reach out to a tax professional for advice.

Secondly, if the profit on your assignment sale is in fact business income because of the factors discussed above, then you should consider incorporating.

The benefit here is that business income is usually taxed at low rates inside a corporation (about 12.2% in Ontario and 11% in British Columbia). This is much lower than the the top tax rate of 53% paid by individuals.

Now be warned:

Setting up a corporation for real estate investing is not for everyone. Be sure to consult with a tax professional before implementing this strategy.

Lastly, it is important to work with an experienced real estate lawyer to discuss your GST/HST options. In my experience, it may be possible to restructure an assignment sale to reduce the GST/HST you pay as an assignor.

In Luca’s case, with the right professionals on his team, he was able to restructure the deal to reduce his taxes by about 38% (50% less 12.2%), pay less GST/HST and put this money into his next real estate project.

Have qu estions about flipping pre-construction real estate? Contact us for a consultation.

The content of this blog is intended to provide a general guide to the subject matter. Professional advice should be sought about your specific circumstances.

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Everything you need to know about Preconstruction Assignment Sales
Say you agree to purchase a pre-construction home for $700,000. You sign the agreement of purchase and sale and pay a deposit of $100,000 to the builder. The new home is expected to be completed a few years later. You decided to sell the property on assignment before it's ready for closing for an additional $50,000.
A Guide to Pre-Construction Assignment Transactions
A Guide to Pre-Construction Assignment Transactions. By Slonee Malhotra. The process of "assigning" an interest in an agreement of purchase and sale is a relatively new concept in Waterloo Region and it is quickly gaining traction. The problem is that the average purchaser does not understand the intricacies of what is involved in order to ...
Condo Assignment Sales: Everything You Need to Know
An assignment sale occurs when a pre-construction condo buyer decides to sell before closing. Since they don't technically own their unit (which may not be completed yet), what they're really selling is their purchase agreement with the builder. The concept sounds simple. However, there are some ins and outs that both sellers and buyers ...
10 Things To Know About Assignment Sales in Real Estate
There may be additional requirements as well, the most common being that the Builder has to approve the assignment. Marketing Restrictions. Most pre-construction Agreements of Purchase & Sale from Toronto Builders do not allow the marketing of an assignment…so while the Builder may give you the right to assign your contract, they restrict you ...
What is an Assignment Sale?
An Assignment Sale in the Pre-Construction Market Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself.
A Comprehensive Guide To Selling Your Assignment Condo
An assignment sale is a sale where the original buyers of a condo or home resell their contract to another buyer before closing. The most common type of assignment is a preconstruction condo assignment. ... Alternatively, investors who purchase a pre-construction home are charged around $24,000 in HST, and are then able to claim a rebate for ...
Unlocking Opportunities: Understanding the Basics of Assignment Sales
An assignment is when the original buyer of a pre-construction property (who signed a contract with the builder) sells their contract to someone else before the purchase closes. Essentially, the buyer takes over for the seller in the contract and pays the deposit plus appreciated value/profit. Assignments happen for a number of reasons.
Selling your pre-construction assignment in the current market
An assignment sale in real estate refers to the transfer of a purchase agreement from the original buyer (assignor) to a new buyer (assignee) before the completion of the property. ... If you cannot successfully assign your pre-construction purchase contract, you're still liable to close on the property, as per your agreement with the developer
Assignment Sale: A Guide
An Assignment Sale can be an incredible opportunity to purchase a unit that you may have missed during the pre-construction sale phase. Even if an assignment is selling for double its original price, the unit could still be worth more upon completion. It's important to ensure that your best interests are being considered in this regard.
What is a Pre-Construction Assignment Sale?
The transfer of a pre-construction contract from the original purchaser t o a new buyer before possession of the unit is taken is called an assignment sale.. John Smith decides to buy a new home in the pre-construction phase in Toronto.The Agreement of Purchase and Sale is for the purchase of the contract for his new home, not the physical unit, since it ha sn't been built or registered yet.
Selling a Pre-Construction Property via an Assignment?
For those of you who are unfamiliar with the concept, an Assignment of an Agreement of Purchase and Sale with a Builder (APS) is when the original Buyer of the said APS decides to sell their right to purchase the subject property from the Builder to a potential new Buyer. In such scenarios the Builder is referred to as the Seller; the original ...
The Comprehensive Guide to Assignment Sale in Canada
Locking in Pre-construction Prices: Assignees can secure a property at pre-construction prices, which might be lower than the prices of completed units in the same development. Avoiding Bidding Wars: In competitive real estate markets, getting involved in a pre-construction assignment can allow a buyer to secure a property without participating ...
Assignment Sale
An assignment sale is when the original purchaser of a pre-construction property assigns their original purchase agreement to another party before taking ownership of the unit. The new purchaser then takes on all the obligations of the original contract and completes the transaction with the builder. Assignment sales are prevalent in new ...
Assignment
The Seller of an assignment is the Assignor and the Buyer of an Assignment is the Assignee. Mpire Realty Investments is now available to help with the purchase and sale of Pre-Construction Townhome/Condo Assignments in the GTA. We have the experience, tools, and connections to give your pre-construction assignment townhome/condo the exposure it ...
The New Proposed HST Treatment On Pre-Construction Assignment Of Sales
In this example, Alireza's profits from the assignment are calculated as follows: Assignment Sale Price - Original Sale Price - Deposits Paid to Builder = Alireza's Profit. $600,000.00 - $500,000.00 - $50,000.00 = $50,000.00 x 13% = $6,500.00 HST payable. Discover the latest updates on the proposed HST changes in pre-construction sales ...
Assignment Sale & pre construction homes for Sale
Assign Circle is Canada's leading real estate platform specializing in exclusive assignment sale and pre construction homes, residential properties and unique homes for sale. Check Out Fine Selection of Assignment Properties. TH 28 Reunion Crossing. Beds: 3; Baths: 2; Garages: 2; 982 Sq Ft; $930,000;
5 Tips when Buying New Condos on Assignment
An assignment sale in the pre-construction condo market. An assignment sale in the sphere of the condo market refers to the "assignment" of a contract to take over a pre-construction unit wing. Additionally, it implies that no individual can attain authority over the title of the condo since the building has not been registered yet.
Assignments For Sale GTA
Find an Assignment for Sale. This is the CondoNow curated list of Toronto Condo Assignments, Town Assignments and more throughout the GTA. An assignment sale is when the original buyer sells a pre-construction property before they take possession - in other words, they sell the contract they have with the developer to a new purchaser. Buyers get a great deal by negotiating significant ...
Assignment of a Purchase and Sale Agreement for a New House or
Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee. This publication addresses the situation where. a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and.
Assignment Sale / GTA / Ontario pre construction assignment
This group is only about assignment sales / pre construction project in Ontario and gta region only. strictly no resales or rentals. Thanks anis.
Pre Construction homes & Assignment Sale in GTA
5 bed | 4 bath | 3306 sqft. Occupancy -2023. Barrie. Terry Fox Drive, Barrie. Our website is appealing and easy to use. You can search for pre-construction assignment sales in Canada; for GTA Homes Assignment sale, pick your location, price range, and other important features. You will find the perfect home that fits your requirements and budget.
Tax on Assignment Sales: What You Need to Know
Similar to selling a resale home, you are required to report an assignment sale on your tax return and pay the necessary tax. Many real estate investors are quick to assume that the profit from an assignment sale is a capital gain. ... Luca purchased a pre-construction condo unit for $450,000 a couple of years ago. He paid a deposit of $90,000 ...
PreConstruction and Assignment Sale
Preconstruction and Assignment Sale related post only. Please DO NOT POST direct buyer post as this is more like realtor professional group. There are NO direct buyer in this group. Co-op post Only.

Everything you need to know about Preconstruction Assignment Sales

Scenario 1: When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence.

Scenario 2: When you signed the agreement of purchase and sale, you intended to move into the property and use it as your primary residence.

Scenario 3: When you signed the agreement of purchase and sale, you intended to rent out your property.

Scenario 4: When you signed the agreement of purchase and sale, you intended to rent out your property.

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A Guide to Pre-Construction Assignment Transactions

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The Condo Assignment Process: Everything You Should Know

If you’re thinking about buying or selling a condo on assignment, here’s what you should know…

Seller FAQs

Should I sell my condo on assignment?

What are the tax implications of selling on assignment?

Does the builder need to be involved?

How much will it cost to sell on assignment?

Will I get my deposit back?

How can I find a buyer?

When is buying a condo on assignment a good idea?

Can I renegotiate the terms of the agreement in place?

Which costs will I pay?

How will closing work?

What else should I know?

10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)

What’s an assignment?

Do assignments only happen with pre-construction condos?

Why would someone want to assign a condo?

What can be negotiated in an assignment sale?

Builder Approval and Fees

Marketing Restrictions

What are the tax implications of real estate assignment?

How much does it cost to assign a pre-construction condo?

How does the closing of an assignment work?

Assignments vs. Resale: Which is Better?

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Assignment Listings

An Assignment Sale in the Pre-Construction Market

An assignment sale can be mutually beneficial for both the buyer and the seller.

An Example of an Assignment Sale

Selling an Assignment

The Details of an Assignment Sale

What Is an Assignment Sale? Why Do These Kinds of Sales Happen?

Assignment Purchase:

Assignment Details:

Is It Worth It to Buy an Assignment?

Let’s Recap Some of the Advantages for Buyers:

Let’s Take a Look at the Advantages for Sellers:

What is an Assignment Sale?

Can any kind of purchase agreement involving a real estate transaction be assigned?

Is an Assignment legal?

Is it necessary to get permission from the developer to assign the contract?

Is there a standard legal form for these types of sales?

Will either the assignor or assignee’s lawyer services be adequate?

Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?

What happens if the construction, occupancy, closing, or unit transfer date is delayed?

What if the assignee doesn't close?

What is the cost of assigning an Agreement of Purchase and Sale?

When does the assignor get their money?