Assignment Agreements

Buying or selling an assignment of a pre-construction purchase agreement is a sophisticated real estate transaction that carries unique legal, tax, and financial considerations. As Ontario’s pre-construction condominium and housing market has grown, assignments have become an increasingly common way for purchasers to exit a pre-construction agreement before closing. At Goldstone Law Professional Corporation, we provide experienced legal counsel for both assignors and assignees in assignment transactions throughout Ontario.

What Is a Real Estate Assignment?

An assignment occurs when an original purchaser (the assignor) under a pre-construction Agreement of Purchase and Sale transfers their rights and obligations under that agreement to a new buyer (the assignee) before the final closing takes place. The assignee steps into the shoes of the original purchaser and completes the purchase directly with the builder. Depending on the assignment price and other factors, the assignor may realize a profit (or loss) on the transaction. Assignments are commonly used when a pre-construction buyer’s circumstances change — they may need to exit the deal due to changes in their financial situation, employment, family circumstances, or simply because the property has appreciated and they wish to realize a profit before closing.

Builder Consent Requirements

Most builder agreements in Ontario require the builder’s consent before an assignment can proceed. Some builders charge consent fees, restrict assignments to certain time periods, or impose other conditions. We review the assignment provisions in the original Agreement of Purchase and Sale and coordinate with the builder to obtain the necessary consent. Our lawyers ensure that all conditions of the builder’s consent are satisfied before the assignment is finalized.

Tax Implications of Assignments

The tax treatment of assignment transactions is one of the most important and most frequently misunderstood aspects of assignment sales. Both the HST implications and the income tax consequences depend on a number of factors, including whether the assignor is an individual or a corporation, whether the property was originally purchased for personal use or as an investment, and whether the assignment profit is treated as a capital gain or business income. Amendments to Canada’s tax laws in recent years have significantly changed the HST rules applicable to assignment transactions. We work with our clients’ accountants to ensure that the tax implications are fully understood and addressed before the transaction is completed.

Our Assignment Agreement Legal Services Include

• Drafting and reviewing assignment agreements for both assignors and assignees
• Reviewing the original Agreement of Purchase and Sale for assignment provisions and restrictions
• Coordinating with the builder to obtain consent and satisfy consent conditions
• Advising on HST obligations and coordinating with accountants on income tax implications
• Reviewing the Statement of Critical Dates and outstanding obligations under the original agreement
• Managing the closing of the assignment transaction and the flow of funds

Frequently Asked Questions — Assignment Agreements

Is there HST on the assignment of a pre-construction condo?

This is a complex area of tax law. Under rules that have evolved significantly in recent years, the assignment of a pre-construction agreement is generally subject to HST on the profit if the original purchaser is not entitled to the new housing HST rebate. Given the complexity and the financial stakes involved, it is essential to obtain tax advice specific to your situation before completing an assignment.

Can a builder refuse to allow an assignment?

Yes. Many builder agreements expressly prohibit assignments without the builder’s written consent, and builders are not always required to grant consent. However, some agreements permit assignments (potentially with a consent fee), and some builders are more flexible than others. We review the specific terms of your agreement and advise you on your options.

Contact Goldstone Law for experienced legal counsel on pre-construction assignment transactions. We represent assignors and assignees across Ontario.