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Toronto (GTA) Condo, Townhome, House Assignment Sales

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What is a Pre-Construction Assignment?

Let’s say you just bought a pre-construction condo or townhome that is going to be built in four years. You sign an Agreement of Purchase and Sale (APS) with the builder, pay a deposit and you wait. Three years later, things change…Maybe you lose your job, you don’t want to live there anymore or you simply want to cash out your pre-construction condo deposit. Whatever the reason, this is where you would try to assign your original purchase agreement contract to a new willing buyer.

Put another way, the assignment means that: The “Assignor” (ie: original Purchaser) transfers all legal rights, obligations and liabilities to the “Assignee” (ie: new Buyer). This means the new Buyer is going to take over all the contractual rights and obligations to complete the property purchase with the builder.

Condo Assignment Sale (Assignors)

In the booming Toronto real estate market, assignment sales are a common occurrence. In other markets such as Montreal, assignments are becoming more common, and not only to Toronto area buyers and sellers. Here is some background information to help you understand what leads to an assignment, as the Assignment Seller or Assignor:

  • Pre-construction Purchase Contract: During the pre-construction phase, when the Buyer agrees to buy a condo from a builder, they sign a pre-construction purchase contract setting out the price, terms and conditions, deposit, etc. The Buyer is essentially buying a piece of paper at this point.
  • Interim Occupancy: This period occurs when the new condo is built and the Buyer can take possession and move into the unit; note that the Buyer does not yet own the condo! The Buyer would pay the builder a “rent” to cover costs, approximately what a mortgage payment + condo fees + taxes will equal. This period could be as long as three months to two years (although six to eight months is more common). No transfer of land has yet occurred, and no mortgage has yet been given. This concept of “Interim Occupancy” is common in the Toronto real estate market. In Montreal, condo units are typically only delivered to Buyers after registration and closing (next step).
  • Registration and Closing: Once a building passes city inspections and finally becomes a legal entity, condominiums are officially registered, ownership is transferred, mortgages come into effect…and Buyers officially become owners (“Closing”).
  • Assignment: If you bought a pre-construction condo and simply change your mind a couple of years later (your situation changes, or you were an investor betting on property values rising), you might still have a way out (assuming the Builder allows assignments in the original purchase contract). Effectively, you want to sell the condo before the occupancy period or official close. Since, you don’t yet own the condo, you can’t actually sell it…But what you can do however, is sell the purchase contract (the agreement you signed with the builder to buy a condo) to another Buyer. This is what we call an assignment.

Assignment Sale

Since very often builders don’t allow assignors to post assignment sales on the main realtor sites, private sales are the alternative people turn to. If you need help selling your assignment, let us know we can help!

Assignment Purchase (Assignee)

Now put yourself in the shoes of an Assignment Buyer or Assignee. If you’ve never purchased an assignment before, as the buyer you just have to be aware of the following:

  1. Assignment Sale is Different from a Resale Purchase
  2. Be Sure You Have Enough for Down Payment
  3. Builder’s Consent is Required
  4. Mortgage & Mortgage Approval
  5. Understanding the Closing Date

Realize that you are essentially buying a piece of paper; you are taking over the contract from the original pre-construction purchaser. You will also need approval/consent from the Builder, as they want to be sure the new contract holder (Assignee) can fulfill their end of the purchase.

Practically speaking, point #2 is a often the biggest factor…Typically, you will need to have a lot of cash on hand, since you would likely have to cover the deposit the purchaser made PLUS any profits the purchaser is looking for.

For example:

Andy bought a pre-construction condo from the Builder for $400K, and put down a 20% deposit (ie: $80K deposit) for it. Years later the project is in progress, and is still a year away from completion. The good news is that the market has been kind, and the condo is easily now worth $500K. Andy is willing to sell (or assign) his purchase contract for $490K before the project is completed. This means a new buyer (Assignee) would need to come up with $170K cash to cover Andy’s deposit and profits (Assignor).

Buy an Assignment

On the flip side as a buyer (Assignee), finding assignments can be a challenge. If you need help looking for assignments to buy, contact us and we will help!