An assignment is a sale transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the agreement of purchase and sale, before the original buyer closes on the property.
There are many reasons why this type of transaction would take place. For example, a buyer’s financial circumstances may change before closing or an unexpected life event may arise and hinder the buyer’s ability to close. Whatever the case may be, if the buyer has an assignment clause drafted in his or her agreement of purchase and sale and has the vendor’s consent, the buyer may be able to assign or transfer the agreement to another purchaser.
Assignment sale transactions are more common with new build agreements rather than resale purchase and sales. Some of the advantages of an assignment is that you can get your deposit back paid to the builder plus any profit that is to be realized from the assignment, avoid paying land transfer tax and avoid closing costs. Some cons of assignment sale transactions are that the builder can restrict marketing and advertising of the assignment, there are generally a smaller pool of buyers for this type of transaction and determining what the market value can be more strenuous.
The agreement of purchase and sale stipulates the terms and conditions in which an assignment will be allowed. Typically, there is a fee that is paid by the original buyer to the vendor and can range from $500-$7,500.00 and the consent of the vendor must be obtained.
The assignment sale is completed in 2 stages the first closing is between the assignor and assignee. The original purchaser receives their deposit plus any profit from the assignee. The second closing is between the assignee and the builder. The assignee pays the remaining amount to the builder and the land transfer tax.
It is important to consider the tax implications of assignments and we recommend seeking advice from a tax specialist or accountant. Generally, assignors can expect to pay tax on any profits realized from the assignment. The assignee can expect to pay the land transfer taxes when they close on the sale.
Call Kesarwani Law Office today and let us review and assist you on your assignment sale transactions. We conduct diligent reviews with your best interest in mind, to ensure you understand what to expect with your assignment so that you can enjoy your new purchase stress free.
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Contact Jasdeep Dhillon at 647-349-8300 or firstname.lastname@example.org
Please do not construe this as legal advice and contact a real estate lawyer regarding all your real estate matters.