Assignment Sales

An assignment of an Agreement of Purchase and Sale can be complicated. You have to make sure you have a professional Realtor familiar with assignment sales, take care of it for you.

An assignment sale occurs when the original purchaser from the Builder (and the Builder) agrees to allow a new purchaser to take over the contract with the Builder. The Assignor (original purchaser) does not have to close with the Builder (*) and does not take possession (if occupancy has not taken place) or title to the property. The Assignee (new buyer) takes over and completes the property purchase with the Builder.


To the Seller/Assignor

1. The seller/assignor does not usually have to pay the Builder’s closing costs and land transfer tax;

2. The seller/assignor does not have to pay the HST rebate back to the Builder. This would be payable on closing by the assignee if he/she chooses or does not intend to occupy the property, and sells it, or will not have it occupied by a family member. If the seller/assignor was renting out the property, he would still have to pay the rebate back to the Builder on closing and claim it back from the government. This can be a significant expense. Please check with your lawyer re: application of HST rebates on pre-construction properties;

3. The seller/assignor essentially avoids the carrying costs (mortgage, maintenance fees, taxes, etc.) for the time between listing the property and selling a property.

To the Buyer/ Assignee

1. The buyer/assignee may receive a price advantage over current properties for sale on the market;

2. The buyer/assignee will, depending on when the assignment takes place, have the ability to make finish selections;

3. The buyer/assignee may be able to take advantage of the deposits of the original buyer and be able to put less of a down payment on the property than he/she would otherwise have been able to.

When Can You Assign an Agreement?

Most new home agreements contain a clause that prohibits the assignment of the contract to any individual. There are exceptions to this: at the time the initial contract was signed; the Builder has specifically agreed to allow for an assignment of the contract.. However, in most cases, the builder specifically advises that if the buyer in any way tries to sell, assign, or list for sale (on the MLS system or otherwise) the property, the he/she is in breach of the Agreement of Purchase and Sale and the Builder is entitled to cancel the deal and the buyer loses his deposits. Therefore, it is very important to check with the builder first and not to list a property for sale on the MLS system or enter into this type of agreement without considering whether or not the original buyer is entitled to assign the Agreement.

Receiving Consent from the Builder.

If the original buyer has the right to assign the agreement under the terms of the contract, he/she shouldcheck with the builder on specific requirements, e.g., fees, and forms which must be completed if the Builder is going to consent to an assignment.

There are many Builders who will allow assignments even though this is not specifically stated in the contract. It is always up to the Builder to waive the prohibition against the assignment and allow the original buyer to assign the agreement. As is the case when the contract allows for the assignment, the Builder will always have specific forms and criteria which must be met. There may also be fees payable to the Builder. The sales office staff should be contacted to determine if the Builder will agree to allow an assignment and if so under what circumstances. Some Builders will allow an assignment but prohibit a listing on the MLS system, while others may not have such a restriction. Each builder is different.

If the agreement prohibits an assignment and the Builder does not allow them, there is little, if anything that the original buyer can do and he will have to wait until after final closing to sell the property.

What Do You Do Once You Determine That Consent Can Be Obtained?

When you determine that the builder will consent to an assignment, one must be careful on how you list the property. If the property can be listed on the MLS system, you do so as an assignment of the agreement. If the builder will not allow listing on the MLS system, you may have to list the property through other mediums or methods of giving the property exposure to buyers, such as by word-of-mouth. Do not list the property on the MLS system if the builder does not allow it as this may result in the original buyer being in breach of the Agreement of Purchase and Sale.

What Do You Do When You Have A Prospective Buyer?

When you have a buyer for the property you would begin the negotiations in the usual manner. It is only after you have worked out the deal with the prospective buyer that you would apply for the consent to the transaction from the Builder. You would not want to apply for consent where you do not have an otherwise firm deal with the new buyer, as you could lose the assignment fee which must be paid to the Builder.

What Do You Have To Think About When You Are Negotiating The Assignment Deal?

There is a lot to think about on assignment transactions. The essential elements, however, are as follows:

What is the purchase price and does it include the adjustments that the Builder will charge on closing?

Most assignment agreements have the new buyer taking over the contract, in its entirety, and paying the adjustments to the Builder on closing. However, in some instances the new buyer and original buyer agree to split the adjustments (other than those for taxes and maintenance fees).

Who will pay the assignment fee?

In most instances the original buyer pays the fee to the Builder.

How much money will the seller/assignor get and when?

Usually the original buyer has paid deposits to the Builder under the contract. When the contract is assigned these deposits are taken over by the new buyer. The original buyer will usually want his deposits back plus the profit on the sale. From the original buyer’s perspective, the more funds that he he/she can obtain before final closing the better. From the new buyer’s perspective, the less he can pay before final closing the better. If the new buyer does not have sufficient funds to put down on the purchase he may not be able to cover the original buyers deposit before final closing. This is because the bank does not fund a mortgage on an assignment nor on consent of the builder. The bank funds on final closing. The way that a balance is usually struck between the new buyer and the original buyer is that upon the Builder’s signed consent to the assignment to the new buyer the original buyer receives the deposits he has paid to the Builder back. He then waits for final closing to obtain his profit. Again, however, it is important to note that each deal is different and that this can be structured in any way that the parties agree.

When will closing take place?

Closing of the transaction depends on the stage of construction completed. If the interim (occupancy) closing has not taken place then the new buyer will have no choice but to wait until the interim (occupancy) closing. The earliest possible date that a buyer can occupy the unit is upon interim (occupancy) closing. If interim (occupancy) closing has taken place, then the closing date can be set to any time after the Builder signs consent to the assignment. It is important to note that the new buyer will have to pay occupancy fees usually from the day that he/she takes occupancy of the property just like the original buyer would have had to pay. If the new buyer takes occupancy mid-month then an adjustment for the original buyer and the new buyer will be made (by the lawyer).

Interest on the deposits paid by the original buyer

In most cases, the new buyer gets the benefit of the credit for any small interest payments on the deposits paid to the Builder. However, if significant deposits have been paid then the original buyer may want to include a clause which entitles him to the interest on the deposits. Most of the time, the new buyer would respond that as he is paying the adjustments on closing he should have the benefit of the interest on deposits. Again, this is a matter to be negotiated between the two parties.

 Creditor incentives and benefits to the original buyer

Very often the original buyer will have negotiated some special incentives into the contract and it will have to be decided whether the original buyer will retain the benefit of these or whether these will be assigned to the new buyer.

Once You Have Negotiated The Terms Of The Contract

After considering the terms of the contract above, an agreement to assign the property is drawn up. This is usually done by way of the TREB assignment agreemen. A schedule detailing how payments will be made is attached to the agreement. As is the original Agreement of Purchase and Sale with the Builder. From the buyer’s and seller’s perspective, the assignment agreement should be clearly conditional on a review of the original Builder’s deal and the Assignment Agreement with the new buyer. This will allow the original buyer and the new buyer to have their lawyers review the terms of the assignment agreement and ensure that all of the above issues have been properly considered and addressed. This will also ensure that the lawyer for the new buyer will be able to look at the original contract with the Builder to make sure that what the original buyer says he has the right to sell is in fact what he has the right to sell. It will also give the new buyer an idea of what the closing adjustments with the Builder will be, which is particularly important if he is expected to pay for them. The entire agreement should also be made conditional on the consent of the Builder to the assignment. As noted above, the Builder must agree to the new buyer taking over and the new buyer and original buyer can only be sure that they have a deal after the Builder has consented.

After the Assignment Agreement is drawn up and the conditions above are included, the agreements should be reviewed by lawyers (seller and buyer). Once everybody is in agreement as to the terms of the contract, the assignment application should be made to the Builder and the steps that the Builder requires for consent should be followed. This may include: confirmation of financing for the new buyer, ID confirmation for the new buyer, signing the Builder’s mandatory consent form and paying the fee.

* It should be noted that the Builder will generally hold the original buyer responsible if the new buyer fails to pay and complete the deal on closing. Please note, that even though the Builder reserves this right against the original buyer, in most cases, it does not give the original buyer the right to complete the transaction if the new buyer does not complete the transaction. This is a risk to the original buyer and he should be aware of this possibility. This does not mean that the original buyer cannot try to complete the transaction.


The assignment transaction should be conditional on financing.The financing should be arranged on the new assignment purchase price. Many mortgage brokers are unfamiliar with financing an assignment transaction and therefore, getting approval for the loan on the new purchase price can be difficult. You should try and send the new buyer to a mortgage broker familiar with assignments..

Other Things To Consider.

TIME – It may take a little longer to put together an assignment deal because of all of the issues noted above.

HST – Please seek advise from your accountant/lawyer on HST related issues. The original buyer has to have intended that the property be his own residence for the assignment to be exempt from HST. If that's not the case, HST may be applicable to the transaction. From the buyer’s perspective, the original buyer should warrant that HST is included in the purchase price. This may be difficult or be an issue where an original buyer has purchased multiple units.

PROGRESS REPORTS – The new buyer should agree to keep the original buyer informed on the progress of the transaction with the Builder. This is because once the new buyer has been granted the assignment, the Builder will no longer have to deal with the original buyer, and the original buyer will therefore not be aware of the progress of the transaction and when he will be paid. This should be added to the schedule to the agreement.

ADDITION CLAUSE(S) – The Builder may not have agreed to it in its assignment agreement, but you should consider putting in a clause expressly allowing the original buyer to complete the transaction with the Builder if the new buyer does not.

FEES – There may be extra legal fees on assignments associated with drafting and reviewing the agreement as noted above, as well as with the multiple closings associated with an assignment transaction [the new buyer’s lawyer has to close with the Builder and with the original buyer’s lawyer). You should select a lawyer who is familiar with this process.

Always contact an experienced Realtor when dealing with an assignment sale.

Al Moosa

Al Moosa

CENTURY 21 Leading Edge Realty Inc., Brokerage*
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