Assignment Sales: Legal Risks & Rewards

The Definition of an Assignment

An assignment is a legal transaction where the original buyer (the assignor) sells their right to buy a pre-construction property to a new buyer (the assignee) before the final closing.

• The Contract — The assignee 'steps into the shoes' of the original buyer.
• The Profit — The assignor often sells the right to buy for a profit (the assignment fee).
• The Final Closing — The assignee must complete the final purchase from the developer.

The Legal Requirements

• Developer Consent — The original contract must allow assignments, and the developer must give their consent (usually for a fee).
• The Assignment Agreement — A separate legal contract between the assignor and the assignee.
• HST Implications — The assignor may be liable for HST on the profit (the assignment fee).

Risks to Consider

• The Deposit — The assignee must pay the assignor for the deposits they already paid to the developer.
• The Financing — The assignee must have a mortgage pre-approval for the final purchase price.
• The Closing Costs — The assignee is responsible for land transfer tax and other closing costs on the full purchase price.