We get this question quite often from both investors and end-users, as these types of transactions work differently than a normal real estate transaction. Generally speaking, an assignment is when, 1) a corporation is buying the “contract” from another corporation or 2) when an individual/corporation is buying the “contract” of a new-build from another person/corporation. Assignment sales can be a great opportunity for everyone involved, from the seller to the buyer. But there are hidden caveats that both the seller and buyer should be aware of, that’s why it’s always best to retain a legal professional to review the contract before signing it.
Within the original purchase agreement and sale signed by the builder and the original buyer (the “assignor”), it will provide a clause confirming if an assignment is allowed. There may be terms and conditions to grant the assignment, so first step is to always confirm by reviewing the Purchase Agreement and confirming with the builder.
The general ideal of an assignment is that the buyer (the “assignee”) will take over all rights and obligations in the Agreement of Purchase and Sale and ultimately completing the transaction, however, if the assignee cannot complete the transaction with the builder, the builder may contact the seller and take legal action against them as well.
Another Caveat is that the during the assignment, some terms and conditions granted to the seller may not be assignable, this may include any rebates and discounts offered to the seller at the time they signed the Agreement of Purchase and Sale. These terms may affect your budget to purchase the transaction greatly.
As of May 6, 2022, there has been a new implementation with regards to the sale of Assignments:
“An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the house as a place of residence), the assignment sale is generally exempt.”
This is important as depending on the reason you are selling the Agreement, it may be subject to HST, therefore it is always important to ensure that this has been clarified as soon as possible.
At the end of the day, assignment sales are a great investment / opportunity to the general public, but, these Agreements are usually very extensive and the choice of words may be more technical and confusing than the daily vocabulary, this may cause misunderstanding and risks if it is over-looked. Whether you are planning to sale the Agreement or buy the Agreement, it is always a good idea to do some research and seek a legal professional’s legal opinion before putting your signature on the paper.
If you would like to learn more about assignments, please feel free to contact our office for further consultation!