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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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AssignToday Blog

10 Essential Things To Know About Real Estate Assignment Sale (For Sellers)

What is an assignment.

As the name implies, an assignment is when the original buyer of a property gives up their rights to that contract and assigns it to another buyer (Assignee). 

An assignment is different from a sale of property because in a sale both parties (the seller and buyer) are involved; and in an assignment, the seller transfers their rights, interest and benefits under their contract to another buyer. The seller can assign their contract before or after closing day.

When does someone need to assign a real estate purchase contract?

When should you assign your contract?

If you are unable to complete the purchase of a property for whatever reason, but would like to move forward with another buyer and give them an opportunity to buy the property at an agreed upon price, then an assignment may be right for you. Some common reasons why someone might need to assign a real estate purchase contract include:

• Financial hardship due to job loss or sudden illness
• Move to different city/ country
• Personal reasons like marriage, children or birth of newborn
• Death or incapacitation of the original buyer
• Loss of financing
• Original buyer looking to sell off to earn profit (speculative buying)

Is it legal to assign a contract?

The short answer is yes, it’s legal to assign contracts. However, there are certain things you need to know about how this process works before you decide whether or not you want to go through with it.

The first thing you should know is that assigning a contract isn’t a casual decision—it’s a legal document. When you sign an assignment agreement, you’re entering into an agreement with another party (the buyer) where they agree to take over your responsibilities under the original contract.

The second thing worth mentioning here is that while assignments aren’t necessarily uncommon occurrences––especially when dealing with multiple parties––they can be tricky because they often involve changing hands during different stages of closing proceedings which can make things unnecessarily complicated sometimes if not done correctly or thoroughly enough beforehand

How do assignments work?

An assignment is a transfer of a seller’s interest in the contract. In other words, it’s when a buyer assigns their rights under a contract to someone else. This can happen before closing or after closing and both scenarios have different implications for the original buyer (the assignor), as well as the new buyer who has taken over their position (the assignee).

Here’s how it works: The assignor transfers his or her interest in the contract to another person—this is known as an “assignment.” In order for this transfer to take place legally, four conditions must be met:

• Both parties must agree on how much money will be exchanged between them;
• Any existing obligations between either party must be transferred over without interruption;
• All future obligations that arise from signing onto this agreement must also be transferred over without disruption;
• And finally, if there are any fees associated with making this switch then those need to be paid

Are there any restrictions on assignments of purchase contracts?

The answer, in a nutshell: No.

The law does not restrict assignments of purchase contracts. In other words, if you want to assign your contract to another buyer or seller, you can do so freely and without penalty—as long as both parties have signed the contract and the sale has closed (or gone into escrow).

Can I assign my purchase contract to anyone?

The answer to this question is a resounding Yes.

You can assign your contract to anyone you like, as long as they meet the seller’s requirements for buyers.

For example, if your purchase contract requires that buyers have good credit and that they put down 20% in earnest money, then only someone who meets these criteria will be able to take over your contract.

So, who might assign their purchase contract? Here are some examples:

• Family members
• Friends (or friends-of-friends)
• Real estate agents (particularly agents who specialize in assignments)

Can the buyer and seller agree to set a price for the contract assignment before it happens?

The answer is Yes, but it’s not necessary or recommended.

The reason is that once an assignment has been documented, there are no further negotiations between the buyer and seller on that contract. So there’s no need for any further discussion about price in advance of closing (unless you want to include some kind of non-binding agreement).

If you want to see what your property might sell for when it comes time to assign your contract, talk with an agent who specializes in negotiating contracts after they have already been signed by both parties.

What happens to deposits paid by the original buyer (the assignor)?

• The deposit is usually returned to the assignor.
• The deposit is sometimes not returned to the assignor (typically if the buyer was a good one)
• The deposit is always returned to the original buyer if that person is still in contract with you and wants to take over as their own private party sale (PPS).

How do I find an end buyer for my property assignment?

There are several ways you can find an end buyer for your property assignment:

• Ask your real estate agent. Your agent should know of buyers interested in purchasing assignments, or at least be able to refer you to someone who can help.
• Ask your real estate lawyer (or real estate broker). Your attorney may also be able to refer you to a buyer’s attorney he or she knows and trusts personally, many lawyers have clients looking for properties like yours all the time
• Submit Your Assignment on Assign Today. Post your property on AssignToday.Com , lot of buyers are looking to take advantage of assignment sale via our website.

If you’re thinking of buying and selling a pre-construction home, you should understand how real estate assignment sales work.

In short: An assignment sale allows buyers who have already put down their deposits on a property to transfer their contract over to another buyer.

This means that while they are still legally obligated to complete the deal, they can make a profit by selling their right to buy the home at its current market value.

The seller will then go ahead with the original sale and collect an additional commission for facilitating this transaction.

While this might sound like an easy way for sellers to make money off of homes that haven’t sold yet (and potentially even get paid twice), there are some things you should keep in mind before taking advantage of real estate assignment sales yourself: you should connect with the Real Estate Professional who specializes in buying and selling preconstruction homes.

Meghna Negi

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Interested in buying or selling an assignment property? These are the six steps to an assignment sale.

Introduction

Are you considering buying or selling a property through an assignment sale? If so, it's important to understand the process and how it differs from a traditional real estate transaction. In this blog post, we will explain the steps involved in an assignment sale, from the initial agreement to the closing of the transaction. Whether you're a potential buyer or seller, this guide will help you understand the ins and outs of the assignment process and make informed decisions about your real estate investment.

Six Steps of an Assignment Sale

• The original buyer enters into a contract to purchase a property.
• The original buyer is interested in selling the contract or is unable to fulfill the terms of the contract, such as making the required down payment or obtaining financing. The original buyer can then list the property on manorAssign.com for maximum exposure.
• Potential buyers (to-be assignees) place offers for the relevant property.
• The assignee negotiates the terms of the contract with the original buyer (seller) and arranges for the necessary financing.
• Once the deal is closed, the assignee assumes all of the rights and obligations of the original contract, including the obligation to complete the purchase of the property.
• The assignee completes the purchase of the property, either at the closing date specified in the original contract or at a later date agreed upon by the parties.

If you're interested in exploring the possibilities of an assignment sale, contact our brokerage, Manorlead, today. Our team has extensive experience and expertise in the assignment process, and we can help you navigate the complexities of the transaction to ensure a successful outcome. Don't miss out on the potential benefits of an assignment sale – contact us now to learn more!

Richard Xie

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Assignment Sale 101

BY Reilly Beesley/July 5, 2022

The condo industry is booming, with that has come a spike in the preconstruction industry, and an increase in assignment sales. If you’ve been looking around at the condo market recently there is a very good chance that you’ve come across the term ‘assignment clause’ or ‘assignment sale’.  

Whether you’re considering opting for an assignment sale, or you’re just looking to get a better handle on what it actually is, we’ve got you covered.   

Below we will break down what an ‘assignment’ is, why someone may want to sell or purchase through an assignment sale, HST changes on assignment sales, and if this is the right option for you.  

What is an assignment sale?

First things first, what exactly is an assignment clause or sale?  

The basics of an assignment sale is the transfer of contractual rights from one party to another. The original buyer of the property (the assignor) gives away the rights and obligations of the property to a new buyer (the assignee). In this transaction the assignee agrees to meet all of the assignor’s commitments and obligations under the original contract of purchase. The assignee is not buying the property outright, but rather buying the “rights” to obtain the condo from a third party, the developer. This all takes place before the property closes.  

While an assignment sale is possible for all types of properties, you will mostly see this type of transaction with pre-construction condominiums.  

This clause will be indicated in the original sale of purchase. Each build is different, making each assignment unique. Unlike traditional real estate transactions, in assignment sales the builder plays a large role and can actually deny or set varying restrictions on selling assignment.  

Why would someone want to do an assignment sale?

There are several reasons why someone may choose to do an assignment sale, with the most popular two being lifestyle change and investment opportunities.  

Lifestyle Change

• Preconstruction condos can be purchased up to several years before the build is even complete. The more time between purchase and occupancy, the greater the potential for various circumstances to arise and different needs to be met. It is not uncommon to see assignment sales due to the original owner’s lifestyle and needs changing.  

Investment Opportunity

• You may also hear about people who “flip” condos. Getting a condo from an assignment sale is one way people do this.  

Why would I want to buy an assignment sale?  

Just like there are several reasons why someone might sell on assignment, there are also several reasons why one might opt for an assignment sale over a typical transaction.  

Purchase condo at lower cost  

• There is typically less competition for these types of properties which translates into a better deal for the buyer.  

Buyers Advantage

• If someone is looking to get out of their contract quickly, it leaves the buyer at an advantage to have more choice in the build while it is still being completed.

• If you purchase a pre-construction condo on assignment there is a larger opportunity for you to build equity on the condo. Any equity that was and will continue to accumulate on the build will now inherently be transferred over.  

Things to Consider if buying on Assignment

While an assignment sale can be mutually beneficial to both the seller and the buyer, just like any sale transaction, there are several things to consider when buying on assignment.

Non-negotiable contract

• When you purchase the contract and rights to the property, you are purchasing as is. You are inheriting a contract and the original terms must be adhered to. As the new buyer you would essentially just be stepping into the shoes of the original owner.  

Closing Costs

• Once complete and the building is registered, you will be responsible for all closing costs. This includes, but is not limited to, development charges, Land transfer Tax, connection fees, HST, and legal fees.

Conditional Period

• Once both parties have agreed upon the sale it then must be submitted to the developer who has the final approval. Making this a weighty and potentially longer period than a regular transaction.  

HST Rebate changes in Ontario

Ontario recently announced in its 2022 budget how HST will be applied to assignment sales on preconstruction condos, homes, and townhouses moving forward.  

Previously to this announcement assignment sales in Ontario only required the new buyer (assignee) to pay HST on the profits made on the transaction. This new rebate announcement means that any assignment sale closing after May 7 th , 2022, is subject to the new buyer (assignee) paying the 13% HST on the entire purchase of the property.  

If considering an assignment sale, it is important to take this new HST change into account.

While not your typical sale or transaction, assignment sales are definitely an option to consider. Interested in learning more about assignment sales? Curious if this is the right move for you? Connect with an agent to find the best option for you!  

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Navigating the Intricacies of Assignment Sales: A Comprehensive Guide

In the rapidly evolving real estate market, assignment sales have emerged as a vital transaction method for buyers and sellers alike. An assignment sale, or an assignment of contract, occurs when the original buyer of a property (the assignor) sells their rights to purchase the property to another buyer (the assignee) before the original buyer completes the purchase from the seller or developer. This article explores the complexities of assignment sales, including legal frameworks, benefits, risks, and strategic considerations for engaging in these transactions.

Understanding Assignment Sales

Assignment sales are particularly common in pre-construction real estate markets, where properties are often sold by developers before the physical structure is completed. These transactions allow original buyers to transfer their purchasing rights to another party, which can be driven by various factors such as changes in financial circumstances, investment strategies, or market conditions.

Legal Framework and Contracts

The legal basis for assignment sales lies in the contract law principle that allows contractual rights to be transferred from one party to another, provided the original contract does not expressly prohibit such a transfer. It's crucial for all parties involved in an assignment sale to understand the legalities and obligations stipulated in the original purchase agreement and the assignment agreement. For authoritative legal information, resources like Cornell Law School's Legal Information Institute offer valuable insights into contract law principles.

Benefits of Assignment Sales

Flexibility for Original Buyers : Assignment sales offer a way out for buyers who are unable to close on their purchase, providing a means to transfer their obligations to another party.

Opportunities for Assignees : For assignees, these sales can present opportunities to purchase properties in sought-after developments that are no longer available directly from the seller or developer.

Potential Financial Gains : Both assignors and assignees may realize financial gains through assignment sales, driven by market appreciation or the desirability of the property.

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Risks and Considerations

Despite their benefits, assignment sales carry inherent risks and complexities:

Contractual Restrictions : Some developers or sellers may impose restrictions on the ability to assign contracts, including prohibitions or fees associated with assignment transactions.

Financial Implications : Assignees typically take on all financial obligations under the original contract, including any deposits paid and the final purchase price. Understanding the financial health of the development project is crucial.

Legal and Tax Consequences : Assignment sales can have legal and tax implications for both assignors and assignees. It's advisable to consult with legal and tax professionals to navigate these aspects effectively.

Navigating an Assignment Sale

Review the Original Purchase Agreement : Carefully examine any clauses related to assignment rights and seek clarification from legal advisors if needed.

Draft a Clear Assignment Agreement : The terms of the assignment, including the rights and obligations being transferred, financial terms, and any conditions precedent to the assignment, should be explicitly stated in a written agreement.

Conduct Due Diligence : Assignees should conduct thorough due diligence on the property, developer, and the state of construction to ensure they understand what they are purchasing.

Legal and Financial Consultation : Engage legal and financial professionals familiar with real estate and assignment sales to review all documents and advise on potential implications.

Assignment sales represent a complex but increasingly common transaction type in the real estate market. Whether you are an assignor looking to transfer your purchase rights or an assignee hoping to step into a desirable property purchase, understanding the intricacies of assignment sales is crucial. By carefully navigating the legal, financial, and contractual aspects of these transactions, parties can effectively leverage assignment sales to meet their real estate objectives.

For further exploration and authoritative guidance on assignment sales, consulting with real estate attorneys and accessing educational resources through government websites ( U.S. Department of Housing and Urban Development ) or academic platforms can provide deeper insights and up-to-date information.

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Things to Consider in Assignment Purchases and Sales in Real Estate

• March 15, 2021

Buyers and investors often purchase properties preconstruction from builders years before the completion of the transaction and things may change during that time. Investors may no longer want to invest in that property anymore and home buyers may experience a change in circumstances that make the property no longer suitable for them. This is where an assignment sale comes in.

An assignment sale is when the original buyer in a preconstruction agreement of purchase and sale (the “Builder Agreement”) transfers their rights and obligations under the Builder Agreement to a new buyer before the transaction is completed with the builder. The new buyer then completes the transaction with the builder directly. An assignment sale is advantageous to both parties. The original buyer can get out of buying a property that is no longer suitable for them. The new buyer will have the opportunity to purchase a property in a sold-out preconstruction project.

There are a few caveats to assignments, which are much more complicated than a regular real estate closing. Below are a few items to consider before buying and selling real estate on assignment.

Can You Assign your Builder Agreement in the First Place?

In Builder Agreements, there are often restrictions and conditions on when or how a Builder Agreement can be assigned. Some agreements do not allow assignments, and many impose strict conditions that must be met before an assignment can take place. Many Builder Agreements will also not allow any listing or advertising the property for assignment sale on MLS or any other advertising method.

If you are thinking of selling your preconstruction property on assignment, it is crucial that you retain a real estate lawyer to review and explain to you what assignment rights you have in your specific Builder Agreement and what steps need to be taken to assign the agreement before you look for a buyer.

Tax Considerations on Assignment Purchases and Sales

Generally, assignment purchases and sales are done at a profit to the seller. If you are selling your property on assignment, it may be prudent to first speak to your accountant on the taxes to be paid on the profits of your assignment sale. Special consideration must also be given to Harmonized Sales Tax (“HST”) as an assignment is also a taxable supply of new property under the Excise Tax Act . HST Rebate eligibility is another issue to be considered before entering an assignment transaction.

The Assignment Agreement of Purchase and Sale between the Original Buyer and the New Buyer

The original buyer and new buyer will need to enter into Assignment Agreement of Purchase and Sale (the “Assignment Agreement”) that sets out the purchase price and the other terms of the assignment sale. The negotiation of the Assignment Agreement is complex and an evolving area of real estate law. Both the original buyer and the new buyer will have to negotiate on many key points, including but not limited to:

• What is the purchase price and how and when the same will be paid?
• What amount of deposit is required and when the same will be released?
• How the Original buyer will be reimbursed for deposits they already paid to the builder?
• How HST and HST Rebates will be dealt with?
• When will the closing date occur and if the closing will be done in stages?
• and much more…

When entering into an Assignment Agreement, it is an absolute necessity to have lawyer review conditions for both original buyer and new buyer, so that terms of the Assignment Agreement can be negotiated. Whether you are selling or buying on assignment, it is important to retain a real estate lawyer to review and negotiate the terms of your Assignment Agreement.

If you are buying on assignment, it is also important to have the Builder Agreement reviewed by a real estate lawyer to understand what terms and conditions you will be bound by in the Builder Agreement.  

Obtaining Builder’s Consent for Assignment

In all assignment transactions, the builder’s written consent to the assignment must be obtained by the original buyer’s lawyer for the assignment transaction to proceed. The Assignment Agreement may also be conditional on builder consent, lawyer review, financing, and any other conditions required by the parties. Before requesting for the builder’s written consent, all other conditions save for the condition for builder consent must be fulfilled and/or waived.

When the builder consents, it is usually in the builder’s form of an Assignment and Consent Agreement, entered into and signed by the original buyer, the new buyer, and the builder. There are often non-negotiable terms and conditions in the Assignment and Consent Agreement, that have a substantial impact on your assignment purchase and sale. A few common examples of terms include but are not limited to:

• a term that removes caps on adjustments in the Builder Agreement
• a term that removes purchase incentives in the Builder Agreement
• a term that removes the HST New Housing Rebate requiring a large adjustment for the same to be paid by the buyer on final closing

A real estate lawyer must be retained to review the Assignment and Consent Agreement carefully before a buyer or seller in an assignment signs the agreement in order to protect their interests and avoid nasty surprises on the day of final closing.

Closing the Assignment Transaction

The closing of an assignment transaction is more complicated than a regular real estate transaction as there would be three parties involved, the buyer (new buyer), the seller (original buyer), and the builder.

Retaining the right real estate lawyer with experience in negotiating and closing assignment transactions is crucial to completing your transaction smoothly and making sure your investment is protected. Kung, Lo & Jia LLP is experienced in negotiating and closing assignment real estate transactions and can guide you through the nuances of closing your assignment deal. Contact us today .

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Selling Real Estate

Mar 20, 2024

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6 minute read

In real estate, there are a number of different types of transactions that come with their own unique benefits and challenges. People are most familiar with a standard purchase or sale of a home that already exists (ie. a resale property). However, the exchange is quite different when someone decides to buy a pre-construction home (typically from a builder) that hasn’t been lived in. A further nuance is an assignment sale, which can occur in both the resale and pre-construction space.

With all that said, assignment sales aren’t widely understood and can often be confusing for those venturing into them. That’s why we put together this comprehensive guide on assignment sales in Ontario! If you find yourself reading this, it's likely you're seeking a deeper understanding of what assignment sales are, their significance, and how they can impact both buyers and sellers. In this blog, we aim to answer all your questions about assignment sales and their nuances. 

Understanding Assignment Sales

First things first, what exactly is an assignment sale? It's like passing the baton in a relay race before the finish line. In real estate, this means the original buyer (assignor) transfers their rights to buy a property to someone else (assignee) before they officially own it. The transfer allows the assignee to take over the assignors rights and obligations outlined in the Agreement of Purchase & Sale (APS). Assignments usually happen in pre-construction projects but can occur in other types of property transactions too. Put simply, an assignment enables the buyer of a home to sell the home before they take ownership of it. 

Why Assignment Sales Happen

Assignment sales can take place for a whole suite of reasons, but typically they occur when the buyer's personal circumstances have changed. This could be related to their financial circumstances, lifestyle changes, work relocation, etc. Especially when it comes to pre-construction, a commitment to purchase typically happens well in advance of the move in date. This leaves a lot of time for things to change for the buyer, potentially requiring them to exit the deal before the closing date. An assignment presents them with a great way to transfer responsibility of the APS to another individual, without having to incur the penalties that might come with trying to back out of the purchase altogether. 

For an assignee, an assignment can be an attractive way to purchase a property. They may be able to take advantage of a drop in value of the property since the assignors purchase or they may have just missed the opportunity to buy the property in the first place. Either way, an assignment provides them the right to purchase a property in a way that is beneficial to them.  

The Process of an Assignment Sale

Imagine you've agreed to buy a brand-new condo that's still under construction. Unfortunately, sometimes life just happens, and you decide not to go through with the purchase. Enter the assignment sale. Here's how it unfolds:

Original agreement: You've signed on the dotted line to purchase the condo.

Change of heart: For whatever reason, you opt not to finalize the purchase.

Finding a new buyer: You find someone who wants to take over your agreement.

Sealing the deal: You both sign an assignment agreement, transferring your purchasing rights to them.

Closing time: The new buyer finalizes everything with the developer.

This process might sound straightforward, but it's laden with legal, financial, and contractual nuances that need careful navigation. This is why it’s essential you engage a real estate lawyer as soon as possible in the process. They’ll be able to advise you on your legal rights and obligations that come with an assignment. 

Advantages of Assignment Sales

So, why consider an assignment sale? For sellers, it's a graceful exit from a property purchase, possibly with a profit if the property's value has increased. Buyers, on the other hand, can snag properties in developments that are no longer on the market or have appreciated in value since their initial sale.

Challenges and Considerations

But it's not all rainbows and butterflies. Assignment sales come with their own set of challenges. There are legal hoops to jump through, financial implications such as taxes and fees, and the ever-present risk of deals not going as planned. This is a legally binding contract so both parties need to do their due diligence and, most importantly, seek professional advice. This includes advice from a real estate agent, real estate lawyer, and a tax professional. While that all might sound expensive, not getting the right advice before committing to an assignment could turn out to be much more costly. 

There have also unfortunately been some bad actors in the assignment space in the past. The good news is that regulators have stepped in to provide better oversight in the space in order to protect consumer, but no regulator is perfect. This just emphasizes the importance of engaging multiple professionals in your assignment, to ensure that you’re getting unbiased and valuable advice.

Navigating the Market

The assignment sales market is a vibrant and ever-changing landscape, heavily influenced by geographic nuances and existing market conditions. This variability means that opportunities for assignment sales can differ significantly from one region to another, often reflecting the local demand for real estate, economic stability, and the pace of new development projects. For individuals keen on exploring assignment sales, whether as potential buyers or sellers, understanding these regional market dynamics is essential.

One effective strategy for identifying great assignment sale opportunities involves monitoring developments that have reached their sales capacity. Sold-out projects often indicate a high demand for properties within a particular area or development, making assignments from these projects particularly appealing to those looking to enter or invest in these sought-after locales.

Not to keep harping on the need for guidance and expertise when navigating the world of assignments, but I’m going to! The specialized nature of assignment sales requires real estate professionals who possess a deep understanding and experience in this specific segment of the market. Real estate agents who specialize in assignment sales can offer invaluable insights, facilitate connections between buyers and sellers, and navigate the complex regulatory and contractual landscape associated with these transactions.

Assessing the value and potential of an assignment sale requires a comprehensive approach. Potential buyers should conduct thorough due diligence, including reviewing the original purchase terms, understanding any restrictions or conditions imposed by developers, and analyzing current market trends to gauge the property's potential for appreciation. For sellers, determining the right price point and understanding the best timing to enter the market are crucial steps in maximizing returns on their investment.

Wrapping Up

And there you have it—a comprehensive guide to navigating the waters of assignment sales. Whether you're looking to buy or sell, understanding the ins and outs of these transactions can make all the difference. So, consult with professionals, do your due diligence, and who knows? Your next real estate adventure might just be an assignment sale.

At Doormat , we have experienced real estate lawyers that can help you navigate the tricky world of assignments. We can also support you with your standard property purchases, sales, refinances, ownership changes, and status certificate reviews. If you have any questions, reach out !

Co-founder and COO

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What Is Assignment Sale And How Does It Work?

What are the benefits of assignment sale (2020 update).

Many may have heard of the term assignment sale but are unfamiliar with how it works.

Let’s take a closer look at precisely what assignment sales are and what’s involved in buying or selling an assignment.

A real estate sale is between two parties transferring the ownership of physical property for a predetermined amount.

However, there are instances where transactional activities occur during the pre-construction phase of a property. Such actions are known as assignment sales. It is possible when the right to buy a property is sold to another individual before completion of the construction.

Assignment sales are most often seen in the condominium market as it is common for the builder to sell out their inventory early on in the development. Still, the units continue to be high in demand. The sale allows new buyers to be given opportunities to own an interest in the units still if specific individuals decide to sell their assignment.

When an offer is made on a pre-construction condo unit, an Agreement of Purchase & Sale would be signed by the original purchaser. The agreement would include an Assignment Agreement Clause stipulating the right to assign the contract to another under certain conditions. Mainly, this permits the original purchaser, or the Assignor, to sell their obligation to purchase the property to another individual, or the Assignee. The Assignee would be the one to complete and close the final sale with the builder.

As participants of an assignment transaction, there are several key factors to consider. In the next section, you’ll see the benefits of buying or selling an assignment.

Buying an Assignment

In a seller’s market, buyers may often find themselves in a bidding war. And end up paying for a significantly higher price. Instead of pursuing this route, buying an assignment can be an excellent alternative as relatively speaking. There is less competition for these properties, which can lower the cost for the buyer.

The assignment of a property has been around in the real estate industry for quite some time. Yet it is not widely known.

This is often due to the marketing restrictions that are usually in place. They prevent assignments from being advertised on popular platforms such as the Multiple Listing Services (MLS®).

With that said, having an agent knowledgeable in this area is crucial as they can open doors to homes that may never otherwise be known. This gives buyers a larger pool of saleable homes with less competition to choose from.

Buying an assignment can also lead to possessing the property quicker than purchasing a pre-sale unit. When an assignment is available for sale, construction is often already well underway, meaning the time to occupancy is shortened. Depending on what stage the development is in, the Assignee can still be able to personalize the unit by choosing their finishes, appliances, and other upgrades to the unit.

The Assignee will be responsible for settling the deposit as well as any profit or loss to the Assignor. Moreover, the Assignee will be liable for the full purchase amount at completion, along with the terms and conditions that are written in the original contract.

Selling an Assignment

With pre-construction sales, there is usually a long period before the unit is ready for occupancy. By going through the process of an assignment sale, the Assignor can get out of their contract without having to endure the mortgage process and incur the closing costs to resell the property.

From an investor’s perspective, the benefit is that not only can the Assignor receive their original deposit back, they also can negotiate with the Assignee for a higher price. With today’s increasing demand for condos, many investors lock in their profits from an assignment sale and use it towards their next investment opportunity.

Continuing a series of profitable transactions.

Assigning the contract can also save investors the interim occupancy fees for a unit they never plan to live in.

Aside from investors, assigning the contract is also an excellent option for individuals who initially plan on settling in the new unit but encounter situations where lifestyle changes affect their ability to fulfill the obligations of the purchase.

As an example, a young couple may be expecting a newborn. Making the unfinished condo unit too small for their growing family. The option to sell the unit before completion. It can allow them to acquire their proceeds back more swiftly. Than if they waited for the condo to be built to be resold in the market.

Thus, assigning the contract to another interested party would release the Assignor from all purchase obligations. As long as the original purchase contract allows for assignments and the new purchaser can satisfy both the details of the agreement and financial qualifications, most builders would approve.

However, the seller of the assignment will need to be aware of building assignment fees that are well documented in the purchase contract. Also, there may be restrictions that prohibit assignments to be marketed on popular platforms. Doing so would be a breach of contract resulting in the loss of the deposit.

How We Can Help

Assignment sales may be an excellent option for investors or homeowners. However, they still can be complicated as the risks and requirements are different as opposed to the usual purchase and sale of a property.

It is vital to work with an experienced realtor who understands the intricacies of assignment sales so that they can guide you seamlessly through the process. Contact JOVI Realty today if you’re interested in learning more about assignment sales.

Source: https://jovirealty.com/what-is-assignment-sale-and-how-does-it-work/

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6 Tips to Consider When Buying New Condos on Assignment Sales

As far as new condos for sale in Toronto  are concerned, purchasing a pre-construction unit is quite common. Sometimes, it also consists of entering into a contract for assignment sales. Before we discuss how to handle such transactions, let us understand the meaning.

What is an Assignment Sale?

An assignment sale refers to the sale of a contract stating the purchase of a pre-construction condominium unit. It indicates that since the building has not been registered, no one can take or transfer the title of the condo. However, you can sell the contract. Once the builder registers the building, you could sell the property and along with the title.

The assignment clause of the contract comes in handy when you have purchased a new pre-construction condo but have to sell it before the completion of construction due to reasons such as relocation. It protects you from accruing any financial penalty.

Tips to Make Buying a New Condo on Assignment Sales Easier

• Assignment closing date - when your assignment sale transaction with the original home buyer is completed.
• Occupancy closing date - the first closing date when the buyer gets the condo’s key from the builder.
• Final closing date - is when the title of the property will transfer to the buyer’s name.
• An assignment closing date when purchasing a new unit is usually before or after the Occupancy Closing date.
• It is Not Like Purchasing A Resale Condo Buying an assignment sale unit lets you acquire the title from the original customer. It does not refer to buying the condo itself. You will get the ownership of the unit only after the Final Closing Date which is why it is not like a resale purchase.
• You will be responsible for the 20% down payment paid by the original purchaser to the builder.
• You will also have to pay the difference amount between the current asking price or the new purchase rate of the condo and its original value.
• Consent of the Builder is Essential The builder’s approval is required to complete the transaction of assignment sales. In some instances, they may not agree if the date of assignment sale is around the final closing date. This is because the builder would want to make sure that there are no confusions as to the final name on the contract.
• Mortgage Approval For the builder to approve the transaction, you must provide Proof of Sufficient Funds to indicate that you can afford the purchase. The amount eligible for a mortgage is equal to the original purchase price less the down payment paid to the builder.
• Do Not Be in a Hurry Since purchasing a new condo requires a substantial amount of investment, it is essential that you consider all the aspects before entering into a sales contract.

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Assignment Sale FAQ

The most detailed assignment sale guide in canada, most frequent questions and answers.

In order to understand what an assignment sale is, we’ll need to touch on pre-construction properties. Buying a pre-construction property means that you purchase a property before it’s ready, sometimes even before its construction has even begun. Building developers usually start pre-construction sales early on, meaning you can buy a condo in a coveted building and desirable area for a fairly reasonable price (sounds impossible, right?) – but here’s the catch, it won’t be ready for a couple of years. The upside is that it will most likely have appreciated in value by the time you receive it, making it a smart investment. As soon as you buy a pre-construction property, you are entering an agreement with the builder until the property is ready.

Now an assignment sale is when the original buyer of a pre-construction property sells their contractual interest in the property to a new buyer, meaning that they resell the pre-construction property before taking possession of it. The sale must be done before the original buyer takes registered possession of the home for it to be considered an assignment sale. As such, the second buyer (the purchaser of the assignment sale) is the one who completes the transaction with the original seller (the builder). To put it simply, it’s basically a purchase of the agreement between the builder & the original buyer, so that the new buyer automatically becomes the new owner of the property once it’s completed.

Since we’ve covered the assignment sale basics, let’s get more technical – the property being sold is still not registered with the land registry office and is probably still under construction. This makes it quite different from a regular sale, in more than one way. Let’s get into the main attributes that make this type of purchase unique.

When purchasing a property via assignment sale, there is usually a larger than normal deposit. The deposit in an assignment sale takes into consideration the deposit paid by the original buyer to the builder (usually 20%), plus additional profit that the seller is hoping to gain. Since the original buyer (now the seller of the agreement) is making a profit on the property above the downpayment already paid, these assignment sales can be very cash intensive – this is the single biggest deterrent for most buyers.

For instance, Buyer A purchases a pre-construction property from the developer of the project (the builder) for $500,000. Buyer A pays a 20% deposit ($100,000) over a two year span to the builder. Before the project is completed, Buyer A decides that they are no longer interested in going through with the purchase and would like to sell the unit, at this point (two years later) the market price of the property has now reached $550,000. Buyer A lists the unit for sale for $550,000, and the new buyer (Buyer B) would have to pay Buyer A their original deposit of $100,000 (20%), plus the property’s appreciation of $50,000. The total deposit that Buyer B will have to pay is $150,000 which, at this point, would be higher than the 20% usually required to obtain a mortgage on an investment property.

Another factor to keep in mind is that the assignment sale cannot take place without the builder’s consent. If you’re thinking of buying a pre-construction property only to then re-sell it as an assignment sale and turn a profit, this is definitely a factor worth considering. The builder reserves their right to hold back on consent for assignment sales and most only allow one assignment to be completed prior to final closing.

Therefore, as the buyer in an assignment sale, you’ll only be able to take over the original purchase agreement between the builder and Buyer A with the consent from the builder. This usually entails the builder requiring mortgage approval documents, ID, and additional information from the new buyer. Then there would be an assignment agreement executed between the builder, original buyer, and you (the new buyer). Needless to say, this is not the case with a regular sale – in a regular sale, the only consent you will need is that of your own and the seller.

Adding to the growing list of factors that make the assignment sale process different, showings do not exist here. Since, in most cases, an assignment sale is done before the building is even ready, the buyer is unable to physically see the property before purchasing it. As the buyer in an assignment sale, you’d be able to see floor plans, mock-ups, and images. In some cases, you’d also be able to head to the builder’s sales center and see/touch the finishes (eg. kitchen cabinets, countertops, tiles, appliances, etc.). You may also see the status of construction of the building by visiting the development site, to get an idea regarding the stage of project.

Since this requires a lot of trust, we recommend doing your research on the city’s reputable builders & the neighbourhood of the development to make sure its the right for you. It’s worth noting, however, that if the assignment sale is taking place during occupancy – when the original buyer has occupied the unit but is not yet in full possession of it – you might be able to see the unit in person.

Within the process of an assignment sale, you’ll find that there is additional paperwork (Builder’s consent, assignment agreement, etc.) and stages (occupancy closing, final closing, etc), which in turn leads to more legal hours. Lawyer fees for these types of sales are usually higher than a traditional sale because there are more contractual technicalities involving more than one party (Buyer A, the builder and Buyer B). Our advice would be to discuss these fees with your lawyer, in order to paint a more accurate picture of the what you can expect.

When buying a property via assignment sale, you are essentially buying a pre-construction property through a third party (Buyer A). With pre-construction properties, you get physical possession of the home (known as occupancy) before you get full possession of the home on paper (known as final closing). Therefore, occupancy fees are fees that you have to pay from the time you get possession of the home (occupancy phase) until the time you take official title of the property (final closing). Final closing usually occurs after the building is completed and has reached a certain percent of total occupancy. At final closing is when you would your mortgage would kick in. During the occupancy phase, you can expect the occupancy fees to be roughly the same amount as your mortgage payments would be with 20% down.

To add to what seems like the never-ending fine print, you might come across a number of additional fees when it comes time for final closing. Most contracts with a builder state that the buyer might incur additional costs that will only be specified upon final closing. The main additional fees are levies charges, also known as development costs; these are costs that the builder incurred while constructing the building, which they pass on to you as the buyer.

The size of these fees really depends on more than one factor: the builder, the city, and the project are a few to list. However, in most cases, you may have the builder set an upper cap limit on these fees – also known as Capped Levies. That way you know that the additional charges will be have a maximum upper limit that they wont exceed. Typically in Toronto, most developers cap development charges for one bedrooms to $7,500, $15,000 for two bedrooms, and over $20,000 for three bedrooms but please keep in mind that these are just ballpark numbers and the exact capped amount varies.

It’s essential to look at the original agreement between the assignment seller and the builder to see if levies are capped and at what amount. If the levies are not capped, you will have to assume the risk of higher-than-anticipated closing costs at the time of taking title to the property. Of course, there are also the common costs associated with homeownership which include land transfer taxes, legal fees, and possible mortgage fees.

Last but not least, it’s critical to consider HST (Harmonized Sales Tax) when buying via assignment sale, which essentially means you’re purchasing a pre-construction property. As a buyer, the HST of 13% in most cases is actually already included in the purchase price of the pre-construction property and the builder then applies for their rebate. However, it’s important to touch on the fact that buying a pre-construction property solely for investment may alter this structure.

If you are purchasing the property solely as an investor, and neither you or a direct family member will be occupying the unit, then you would have to pay the HST at final closing and apply for the New Residential Rental Property Rebate (NRRPR) after leasing the unit for one year. For more information regarding qualifications and the amount of the rebate, visit this publication from the CRA.

If you’re purchasing the assignment for yourself and it will be used as a primary resident then you’ll have to confirm that the HST is included in the purchase price of the assignment. For more information you may also visit the CRA’s info sheet here.

When it comes to HST and the status of your occupancy, you should always consult with your accountants and lawyers as each circumstance is unique.

Well, after much unbiased consideration, it’s safe to say that purchasing/selling on assignment can be a win-win scenario for both parties – the assignment seller gets a price above purchase price and the buyer, in most cases, snags a property below market price. Since assignment sales tend to occur well into the construction phase, there’s also less risk imposed on the buyer in an assignment sale. That being said, there are a number of reasons why a person might want or need to sell/buy a property on assignment:

Selling Reasons:

• Change of plans: since pre-construction homes can take years to be completed, the original buyer situation could have changed within that time. For example, the original buyer may have started a family and is now looking for a larger, more suitable home.
• Financial trouble: the financial situation of the original buyer may have changed over the years, and they’re now put in a position to have to sell the property. For example, the original buyer may have lost their job, meaning they can’t get qualified for a mortgage and are now unable to complete the purchase.
• Profit: it’s very common for investors to buy pre-construction homes with the aim of re-selling them to turn a profit. This is usually a common scenario for assignment sales in the Toronto real estate market.

Buyer Reasons:

• Brand new building/area: it can simply be that the purchaser is looking for a property that has never been occupied, or is in a newly developed neighbourhood, or just wants to secure a property in a new, buzz-worthy development. An example of this is Nobu Toronto.
• Below market price and less competition: since these purchases require at least 20% down-payment, in most cases it could be that these units have less competition and can be purchased at somewhat of a bargain.
• Profit: again, investors also look to buy properties via assignment sale because they believe that the building or neighbourhood will continue to appreciate in value, and come time of total completion or a few years later they would be able to sell for higher.

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Condo Assignment - A Guide for Buyers & Sellers

What are assignments all about?

As a purchaser, you will usually wait a couple of years after signing an Agreement of Purchase and Sale (APS) for a condo in the pre-construction phase before actually moving in and taking possession of the unit. Typically, a realtor that specializes in pre-construction will ensure that an ‘assignment clause’ is drafted into your contract, giving you various options closer to the completion date. Why? Your situation may change – nobody knows what will happen between the time you sign the contract and when the building is ready for occupancy. Life happens. The assignment clause allows the original purchaser(s) to sell (assign) the Agreement of Purchase and Sale (contract) and all of its legal rights to a potential buyer. In the assignment world, selling is called assigning, the buyer is the assignee and the seller is the assignor. Assignments can get a little overwhelming for both assignees and assignors, but with the right lawyer/realtor combo, the transaction is a breeze. Let’s dive a little deeper into how you can assign your newly purchased condo unit below.

Who can assign?

Only the purchasers who’s names are listed on the original APS and have a legally valid assignment clause drafted into the agreement have the right to assign their suite. Unfortunately, those purchasers who did not request that the right to assign be written into the agreement at the time of purchase will not be able to get the builder’s approval to assign. Often times, builder consent must be granted before you are able to begin advertising your assignment sale. In order to obtain consent, the developer may have certain criteria that has to be met:

• a percentage of the building has to be sold firm (typically 80% plus) - at this point, the builder has most likely received their construction financing and you are not competing with the sales of their remaining inventory;
• a predefined portion of your deposits must have cleared (for example 3/4 (15%) of an agreed 20% deposit) - we have also seen builders request that any remaining deposits be paid in full and some even ask for futher deposits;
• the builder’s lawyer must grant you approval;

The criteria may vary per developer, but the above is what you should generally expect if you plan on assigning your unit. Make sure that you are aware of your rights and obligations, before committing to an agreement.

How do you assign?

Once you are ready and the builder gives you the go ahead, you can begin advertising your unit. Keep in mind that builders usually do not permit listing the suite on MLS since as a pre-construction purchaser, you do not have title to the unit until final closing. Also, a lot of MLS boards do not allow a property to be listed on the service if the property cannot be physically shown. The best way to gain the most exposure for your listing as an assignor is to contact a realtor who specializes in pre-construction condos. Pre-construction experts have access to different Realtor networks that focus on marketing exclusive "off-market" properties, such as assignments. At inCondo, we also have a dedicated section for our assignment listings . Most developments sell out of inventory quickly upon launch and a lot of buyers are not willing to wait a couple of years to take possession of their investment. These two factors set the stage for the condominium assignment market. Pre-construction professionals have a database of buyers who prefer to purchase a brand-new, never-lived-in unit and since there is most likely no remaining inventory available from the builder, they take to assignment sales.

What are the costs associated with assigning?

The fees associated with assigning your unit vary per developer and can depend on the incentives available at the time of signing the original APS. Builders may charge a fee if you decide to assign your unit – anywhere from free to $5,000+, in order to cover lawyer and administration fees on their end. The assignment transaction between assignor and assignee is separate from the original transaction with the developer. A commission should be paid to the Realtor that brings a client (assignee) and your listing Realtor will charge a marketing fee as well. Commissions are always negotiable. The only recommendation we can make here is to use the services of an agent that understands condo assignments and deals with pre-construction condos. Another fee you will encounter is your lawyer fee. Although assignments are increasing in popularity, most real estate lawyers do not work on assignments and it can be tricky to find an expert. David Feld & Sonia Kalia’s office ( wearelaw.ca ) is an excellent resource for legal assistance with regards to your assignment sale. When you find an assignee and accept an offer, or vice versa, always have your Assignment Agreement of Purchase and Sale reviewed by a lawyer to avoid complications upon closing and title transfer. Fees typically range from $2,000 - $2,500 since there are more contractual elements to inspect (including the original APS) compared to re-sale.

What should I expect while looking for an assignment?

As the assignee in an assignment sale transaction, we highly recommend that you fully read through the original APS with your lawyer to ensure a smooth transfer process. Keep in mind that you will be bound to the terms and conditions set out in the original contract – all of the risks, but also the rewards are passed on. Some of the liabilities include paying HST upon closing (unless you purchase for personal use), disbursing Land Transfer Tax (though first-time home buyers qualify for a rebate), providing the assignor with their deposits paid to date (potentially profits vs. original purchase price as well), and development/educational levy costs (these may be capped in the assignors original APS). You would usually encounter these same liabilities if you were to purchase the unit at the pre-construction phase years prior regardless, but at the assignment stage, there is little to no room for negotiation – all of the original contractual obligations transfer to the assignee. However, there are plenty benefits to purchasing an assignment sale, which include: selecting colours, upgrades and finishes (an assignee would have this opportunity if the purchase occurs approximately 1 year prior to construction completion), enrollment in the Tarion Warranty Program (legislated by the provincial government to protect the buyers of new construction), as well as access to brand new units located in the most desired areas and not available on the re-sale market, while eliminating the threat of other contesting buyers.

Overall, assignment sales are extremely intricate transactions which require your Realtor and lawyer to carry the utmost professionalism and expertise but can be very lucrative for both assignees and assignors. If you are currently searching for an assignment, would like to explore assignment opportunities, or have any questions, we are always happy to help!

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Really liked how you explained it all. Very well-articulated!

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Everything You Need To Know About Assignment Sales

June 28th, 2022 / Investing

Housing is in critical demand in Toronto and the GTA, and builders are hard at work trying to keep up. With so much pre-construction happening, assignment sales are becoming more popular.

Assignment sales are an excellent vehicle for anyone who wants to break into the real estate market and is not in a rush to move. They can also be complicated to the point of intimidating. 

This article will tell you everything you need to know about whether an assignment sale is right for you.

The first fact that might surprise you is that purchasing an assignment isn’t buying a property at all. You’re simply buying the contract, which gives you the right to purchase the unit once construction is complete.

Why Buy Pre-Construction In The First Place?

Who doesn’t love the idea of a brand new house where you’re the first person living there. Everything is spotless and pristine, and you have the latest technology in everything. It will be a long time before you have to worry about worn-out counters, floors or chipped paint.

In fact, it will be a long time before you even get to walk in the door, because the unit hasn’t even been built yet. Many pre-construction homes are sold before construction even starts!

I have helped investors buy and sell properties for years. Here are some of my other posts that you may find helpful:

• Your Guide To Status Certificates
• 5 Reasons To Work With A Realtor® With Negotiation Expertise
• My Real Estate Community Guides

Why Sell Your Assignment?

It can take years before you can finally move into a pre-construction home. During that time, a lot can change. You may find a new job in a different city. You could get married or divorced or start a family. Or perhaps you simply decide that you don’t want the unit anymore.

Some purchasers are investors who never intended to complete the transaction in the first place. The only intention was to sell the contract for a profit before the final construction is completed. 

Whatever the reason, the condo no longer suits your lifestyle. Selling the assignment can give you the funds you need for your next step.

What Makes Assignment Sales So Complicated?

Traditional real estate deals involve only one transaction, which can get complicated enough. Negotiations take place between two parties, the buyer and the seller. Both sides want a fair deal, but rarely agree on what “fair” means. 

With an assignment sale, there are two transactions to complete, the initial purchase of the contract and the final closing when the new owner can move in. Assignments also bring the builder into the mix, involving three parties in the transaction. 

Every builder has different policies regarding assignment transactions. Some builders don’t allow them at all. Those that do allow assignments will have a list of guidelines you must abide by when selling the rights to the unit.

The Pros and Cons of Buying An Assignment

Buying an assignment has many advantages, including:

• Eliminating the risk of cancellation. When you buy pre-construction, it can take years before the project even starts, and delays can happen. In the worst-case scenario, the project can get cancelled, leaving you to start over from square one. When you buy an assignment, you can get in closer to the completion date and you don’t have to wait nearly as long to move in.
• Buying an assignment can save money . Since the market almost always rises in value, you’ll usually pay less when you buy your unit before construction completes.
• You can sell your assignment at a profit . If property values rise significantly, you can consider reselling the assignment and taking the profit. 
• You get a beautiful, brand-new living space with a full Tarion warranty.

Of course, buying an assignment also comes with its share of challenges and risks.

• You will need a significant amount of cash upfront. When you buy an assignment, the seller will want to recoup their full deposit, plus a profit as property values rise. You need to pay these funds upfront, and you can’t roll them into your mortgage. There will also be closing costs of 3-5% of the total sale price, which you will have to pay upon moving in.
• Delays can still happen. You won’t have to wait as long as when you buy an initial contract. However, building delays can happen at any point during the construction. In the meantime, you’ll have to arrange for temporary accommodations while you wait.
• You could lose money. If you’re buying an assignment as an investment, there is always a slight chance that the market could take a tumble. If you cannot carry the cost of holding the contract, you may have to sell it at a loss.
• Developmental fees are in excess of closing costs . Plus, there may be a final portion of the deposit due on moving in.
• For condo assignments, there are occupancy fees . This is similar to paying rent to the builder once the construction is complete and before the building is registered. 
• If you do not plan to live in the home, you will need to pay the HST. The builder will not be eligible to get the HST rebate if you decide to rent the unit as well during interim occupancy. 
• Your bank may not finance the entire purchase . Some banks appraise the home at the price the original owner paid. This could leave you with a larger portion to pay at closing that may not be covered by your mortgage.

The Pros and Cons of Selling An Assignment

What if you’re the original buyer and want to cash out of your investment? Selling an assignment also has its share of advantages and disadvantages. 

The downsides of selling are a smaller pool of buyers due to the complexity and the amount of cash needed upfront. The rules around assignments can scare some potential buyers away.

Even if your original agreement allows for assignment sales, most builders still have to approve your transaction before you can continue. Once your assignment sale is approved, there are several advantages: 

• You will save on closing costs. Since you’re not moving into the unit, you won’t have to pay land transfer taxes and other closing fees.
• You can earn a profit. If the market goes up after your initial purchase (as it almost always does), you stand to make a profit. As an investor, selling assignments allows you to earn money without the hassle of dealing with tenants.
• Quick turnaround times and the opportunity to reinvest. Since you don’t have to wait until the building is complete, you can sell your assignment at any time and take the profit.

Assignment sales can be complicated but are a great way to get started in the market as a homeowner or an investor. Your best bet is to consult with a real estate agent with experience who can guide you through each step in the process.

Are you thinking about taking the next step as a real estate investor? Asking questions is always free. Reach out right here, and I will happily point you in the right direction.

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Everything you need to know to sell your preconstruction condo assignment

Lets just get it out there, condo assignment sales are a tough sale, even in the hottest market. So we’ve compiled a short preview of what we do to increase the chances of a successful sale.

For a number of reasons, condo preconstruction assignment sales are a very difficult sale. Many agents have very little experience dealing with an assignment sale, on both the buying and selling end. Some agents try put their clients off assignment sales in lieu of selling them a resale home. Some don’t market the home to its full potential, because they think their efforts are futile. Either way, it’s VERY important to work with someone that understands assignment sales; for example, without builder’s consent, advertising your assignment for sale could mean you forfeit your deposits and lose your home.

Below is a quick description of what a preconstruction assignment is:

• An assignment is when the buyer of a preconstruction condo or home decides to sell their contract before the home is complete. The property does not legally exist yet, so the seller is selling their contract with the builder.
• The new buyer is accepting the original terms set out in the contract.
• You cannot assign a contract without the builder’s consent, which can be arbitrarily withheld. Sometimes the builder will charge a fee up to 1% of the price, or even more. But it’s usually still cheaper to assign the contract, compared to waiting till closing and then selling.
• Assignment offers deal with not just purchase price and closing date, but also taxes, deposits, development fees and levies, and liabilities found in the builder’s original contract.
• Once the fine details of the assignment are agreed upon, the assignment is conditional on the builder accepting the new buyer. The buyer has to provide proof of financing and steps into the role of the previous buyer.
• We also strongly believe every contract should be conditional on lawyer’s approval.

Historically, Condo assignments have a low list-to-sales ratio, even in this market. However, with the right marketing, and careful attention to detail, assignments sell.

I evaluated assignments that sold and found out that:

Homes that are in interim occupancy have the highest chance of selling, because prospective buyers can tour the home. Equally important is providing: Floor Plans, Square Footage, Examples of Colors and Finishes, Maintenance Estimates, Artist Renderings, Model Suite Photographs, Site Map, Builder’s Reputation, and Neighbourhood Images and Stats. Homes located in buildings that are sold out, or in high-demand locations, are often at a big advantage too. Because the perspective buyer might not be able to view the home, it’s important to sell the location, lifestyle, builder, and space to the buyer.

To sell preconstruction assignments, we personally rely on the MLS board, internet distribution and paid Facebook advertising. We also advertise on Sothebysrealty.ca, Sothebysrealty.com, Prelist.org, The Lourantos Group, Cottage Marketer, HomeFinder, Homicity.com, Listnet.ca, Mortgage Group, Ovlix, Point2Homes, Propy, Seekaboo, Snap Up Real Estate, The Real Estate Book, Tradehomes, World Properties and the following premier online publications:

No assignment is too big or too small for our team. If you’re not sure if you can assign your home, or if you’re contemplating the idea of assigning your home, we’d be happy to chat. Just contact us here .

Related Posts

6 important facts to consider when selling a preconstruction condo.

A Comprehensive Guide To Selling Your Assignment Condo

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Home » Real Estate News » Real Estate Guide » Assignment Sales

Fundamental Difference Between a Resale vs Assignment Sales

June 21st, 2023 8 min read -->

A resale is a transaction where the buyer purchases a property from the original owner. The property is already completed and ready to move into. On the other hand, an assignment sale is a transaction where the buyer purchases the rights to a property from the original owner. The property is under construction and is still being prepared to move into. Here is a table that summarises the key differences between Resale vs Assignment Sales

Table of Contents

What are the Pros and Cons of an Assignment Sale?

Assignment sales, also known as contract assignments or flipping contracts, are common in the real estate market. In an assignment sale, a buyer who has entered into a purchase agreement with a seller transfers their rights and obligations under the contract to a third party before the completion of the sale. While assignment sales can offer certain advantages, they also have potential drawbacks. Let’s explore the pros and cons of Assignment Sales: 

Pros of Assignment Sales 

• One of the primary advantages of assignment sales is the potential for a significant profit. Assignors can secure a property at a lower price and then sell their contract to a new buyer at a higher price, capitalising on market appreciation or favourable negotiation.
• Assignment sales allow buyers to secure a property without obtaining a mortgage or making a down payment upfront. This flexibility can benefit investors or buyers who may need more immediate access to funds but want to secure a property at a particular price.
• Assignors can avoid the financial risks of property ownership, such as mortgage payments, property taxes, and maintenance costs. If the market conditions change or the buyer’s circumstances alter, they can sell the contract to another party without taking on these financial burdens.
• Assignment sales provide a quick exit strategy for buyers who may change their minds or encounter unforeseen circumstances that prevent them from completing the purchase. By assigning the contract to another buyer, they can exit the transaction without the complications of selling the property on the open market.

Cons of Assignment Sales

• Assignment sales involve intricate legal processes and require the involvement of multiple parties, including the original buyer, the assignee, the seller, and sometimes even lenders. The complexity can lead to challenges, delays, and increased legal expenses.
• The success of an assignment sale depends on the consent of the original seller. Some sellers may not permit or may have restrictions on assignment sales, limiting the pool of potential properties available for assignment.
• As an assignor, you relinquish control over the property and the final sale process once you transfer the contract to the assignee. This lack of control can be frustrating if the assignee’s actions or decisions affect the property negatively or lead to complications.
• In a declining market, an assignor may need help finding a buyer willing to pay the assigned price. This can result in financial loss if the assignor cannot sell the contract or need to sell it at a lower price than they initially anticipated.
• Some critics argue that assignment sales contribute to housing speculation and affordability issues, as they can drive up prices and limit housing supply. This perception can lead to negative public sentiment and potential regulatory scrutiny in some markets.

Assignment Sales for Sellers: What are its Advantages? 

• Higher Selling Price : In an assignment sale, sellers can sell their property more elevated than the original purchase price. Assignors, who act as intermediaries, often negotiate a higher price with the new buyer due to market appreciation, renovations, or other factors. This allows sellers to maximise their profit and earn more than anticipated.
• Faster Sale Process : Assignment sales can expedite the sale process for sellers. Rather than waiting to complete the original contract, sellers can transfer their rights and obligations to the assignee. This enables them to sell the property without going through the typical marketing and negotiation process, which can save time and effort.
• Avoidance of Holding Costs : Sellers can avoid holding costs associated with property ownership by selling through an assignment. These costs may include mortgage payments, property taxes, insurance, maintenance, and other ongoing expenses. Selling through an assignment allows sellers to transfer these responsibilities to the assignee, potentially saving them money in the long run.
• Increased Flexibility : Assignment sales provide sellers more flexibility regarding their plans. By completing the sale through an assignment, sellers can move forward with their plans without waiting for the original contract to close. This can be particularly advantageous if sellers need to relocate, downsize, or make other arrangements quickly.
• Lower Marketing Costs : When selling a property traditionally, sellers often need to invest in marketing efforts to attract potential buyers. This can include listing fees, advertising expenses, staging costs, and other related expenditures. In an assignment sale, the assignee typically assumes the responsibility of finding a new buyer, reducing or eliminating the need for sellers to incur marketing expenses.
• Minimised Default Risk : In certain situations, sellers may encounter circumstances that prevent them from completing the original purchase contract. This could be due to financial constraints, changes in personal circumstances, or other unforeseen events. By assigning the contract to a new buyer, sellers can avoid defaulting on the contract and potential legal consequences.

What are the Advantages of Assignment Sales for Buyers? 

Assignment sales offer several advantages for buyers in the real estate market. Here are the key benefits of assignment sales for buyers:

• Potential for Lower Purchase Price : Buyers engaging in assignment sales can secure a property at a lower purchase price than buying on the open market. Assignors often negotiate a favourable purchase price when they contract with the original seller. This can be advantageous for buyers looking for a good deal or who want to invest in properties with potential appreciation.
• Flexibility in Financing : Buyers participating in assignment sales can enjoy greater flexibility in financing options. Since they are buying the contract from the assignor, they may not need to secure a mortgage or make a substantial down payment immediately. This flexibility can be particularly beneficial for buyers needing more immediate access to large sums of money or facing challenges in obtaining traditional financing.
• Ability to Customize the Property : In some cases, buyers engaging in assignment sales can customise or make changes to the property before the completion of the sale. This flexibility allows buyers to tailor the property to their preferences by selecting finishes, fixtures, or design elements and creating a personalised living space or investment property.
• Potential for Profit : Assignment sales can provide buyers with profit potential. Suppose market conditions favourably change between the time the assignor entered into the contract and the completion of the sale. In that case, buyers can sell the property at a higher price, capturing the appreciation and generating a profit without ever taking ownership. This profit potential can attract investors or buyers looking for short-term gains.
• Expedited Purchase Process : Assignment sales can facilitate a faster buyer purchase process. Rather than going through the lengthy process of searching for a property, negotiating with sellers, and dealing with potential competing offers, buyers can step into an existing contract and finalise the sale with the assignor. This can save time and streamline the purchase process, allowing buyers to secure a property quickly.
• Lower Transaction Costs : Assignment sales may involve lower buyer transaction costs than traditional property purchases. Since buyers purchase the contract from the assignor, they may not need to pay certain closing costs associated with the initial purchase, such as land transfer taxes or legal fees. This can result in savings and make the overall transaction more affordable for buyers.

What Disadvantages Does a Buyer Face on Assignment Sales? 

Here are the key drawbacks of assignment sales for buyers:

• Limited Property Selection : Assignment sales often involve a limited pool of properties. Assignors may sell their contracts for various reasons, such as properties with a potential appreciation or in-demand locations. As a result, buyers participating in assignment sales may have fewer options than in the broader real estate market.
• Potential Seller Consent Issues : The success of an assignment sale depends on the consent of the original seller. Some sellers may have restrictions on assignment sales or may simply refuse to allow the transfer of the contract to a new buyer. This can create challenges for buyers who have invested time and effort into an assignment transaction only to have it rejected by the original seller.
• Lack of Control and Information : Buyers engaged in assignment sales have limited control over the original contract and the terms negotiated by the assignor. They may have yet to be involved in the initial negotiation process, which can lead to uncertainty about the terms and conditions of the purchase. Additionally, buyers may need more access to information about the property, its history, or potential issues, as they rely on the assignor for this information.
• Increased Complexity and Potential Delays : Assignment sales can be more complex than traditional property purchases. Multiple parties include the original seller, the assignor, and potential lenders. This complexity can lead to delays, as other legal and administrative processes may be required. Buyers may need to navigate various agreements and documents, potentially leading to more extended closing periods or increased legal expenses.
• Higher Risk of Non-Completion : Assignment sales carry a higher risk of non-completion than standard property purchases. Since buyers are assuming a contract from the assignor, they may face uncertainties and risks associated with the assignor’s ability to fulfil their obligations. If the assignor fails to complete the contract, it can lead to complications, potential legal disputes, and the loss of any invested time or resources.
• Market Fluctuations and Financial Loss : While assignment sales can offer profit potential, they also expose buyers to the risk of financial loss. Suppose market conditions decline or change unfavourably between the time of the assignment and the completion of the sale. In that case, buyers may need help to sell the property for a profit. Sometimes, they may need to sell lower than the initial purchase price, resulting in a financial loss.

What are the Disadvantages of Assignment Sales for a Buyer?

Here are the key drawbacks of assignment sales for buyers: 

• Limited Property Selection: Assignment sales often involve a limited pool of properties. Assignors may sell their contracts for various reasons, such as properties with a potential appreciation or in-demand locations. As a result, buyers participating in assignment sales may have fewer options than in the broader real estate market.
• Potential Seller Consent Issues: The success of an assignment sale depends on the consent of the original seller. Some sellers may have restrictions on assignment sales or may simply refuse to allow the transfer of the contract to a new buyer. This can create challenges for buyers who have invested time and effort into an assignment transaction only to have it rejected by the original seller.
• Lack of Control and Information: Buyers engaged in assignment sales have limited control over the original contract and the terms negotiated by the assignor. They may have yet to be involved in the initial negotiation process, which can lead to uncertainty about the terms and conditions of the purchase.
• Additionally, buyers may need more access to information about the property, its history, or potential issues, as they rely on the assignor for this information.
• Increased Complexity and Potential Delays: Assignment sales can be more complex than traditional property purchases. Multiple parties include the original seller, the assignor, and potential lenders. This complexity can lead to delays, as other legal and administrative processes may be required. Buyers may need to navigate various agreements and documents, potentially leading to more extended closing periods or increased legal expenses.
• Higher Risk of Non-Completion: Assignment sales carry a higher risk of non-completion than standard property purchases. Since buyers are assuming a contract from the assignor, they may face uncertainties and risks associated with the assignor’s ability to fulfil their obligations. If the assignor fails to complete the contract, it can lead to complications, potential legal disputes, and the loss of any invested time or resources.
• Market Fluctuations and Financial Loss: While assignment sales can offer profit potential, they also expose buyers to the risk of financial loss. Suppose market conditions decline or change unfavourably between the time of the assignment and the completion of the sale. In that case, buyers may need help to sell the property for a profit. Sometimes, they may need to sell lower than the initial purchase price, resulting in a financial loss.

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Frequently Asked Question (FAQs)

What is the purpose of resale.

Resale is to transfer ownership of a previously owned item or property from the seller to a new buyer.

What is selling and reselling?

Selling refers to exchanging goods or services for monetary compensation, while reselling involves selling something previously purchased, typically to make a profit.

How much money can you make from resale?

The amount of money on resale depends on the type of property you have and the real estate environment of the area.

What is a good resale percentage?

The resale percentage depends on the real estate environment.

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