An Assignment Sale in Ontario refers to a real estate transaction in which the original buyer (the assignor) of a pre-construction property sells their rights and obligations under the purchase agreement to another buyer (the assignee) before taking possession or ownership of the property.

Key Features of an Assignment Sale:

1. Transfer of Contract, Not Property:

   • The assignor is selling their rights to the purchase agreement with the builder, not the physical property itself, as the property is often still under construction.

2. Price Structure:

   • The assignee typically pays:
     • Deposit reimbursement: The amount the assignor has already paid to the builder.
     • Profit: Any additional premium or price increase agreed upon by the assignor and assignee.
     • The assignee assumes the remaining payments owed to the builder.

3. Closing Process:

   • The transaction closes in two stages:
     • Assignment Closing: When the assignee takes over the contract from the assignor.
     • Final Closing: When the builder officially transfers ownership to the assignee (upon property completion).

Reasons for Assignment Sales:

• Assignor's Perspective:

  • Financial changes or inability to complete the purchase.
  • Investment purposes (selling for a profit before property completion).
  • Change in personal circumstances (e.g., relocation).

• Assignee's Perspective:

  • Opportunity to buy a pre-construction property in a desirable area at a potentially lower price than market value.
  • Faster move-in timeline compared to starting a new purchase from the builder.

Legal and Tax Implications:

1. Builder Approval:

   • Most builders require their consent for an assignment sale, and there may be administrative fees.

2. HST and Taxes:

   • The profit made by the assignor may be subject to HST (Harmonized Sales Tax).
   • Assignment sale profits may also be subject to capital gains tax or treated as business income.

3. Land Transfer Tax:

   • The assignee is responsible for paying the Land Transfer Tax upon the final closing of the property.

4. Legal Documentation:

   • Both parties typically involve lawyers to review the assignment agreement and ensure compliance with the original purchase agreement.

Pros and Cons:

For Assignors:

• Pros: Exit a contract early, realize a profit.
• Cons: Builder fees, potential taxes.

For Assignees:

• Pros: Potential savings, shorter waiting period for completion.
• Cons: Additional legal complexities, higher upfront costs (reimbursement + profit).

Assignment sales are common in hot real estate markets like Ontario, especially in high-demand cities such as Toronto. It’s advisable to consult with a real estate lawyer and an experienced agent familiar with assignment transactions.