What is an assignment sale?
An assignment sale is the transfer of a pre-construction purchase contract from the original buyer to a new buyer before the property closes, typically requiring the builder's written consent.
In Ontario real estate, an assignment sale lets an original buyer transfer their purchase contract for a pre-construction property to another person before closing. The original buyer essentially steps out of the deal, and the new buyer takes their place in the contract. This differs from selling a completed property because no real estate transaction yet exists on title.
Builder consent is required for most assignment sales. Developers include assignment clauses in purchase agreements that specify whether assignments are allowed and under what conditions, often limiting the number of assignments or requiring the builder to approve the new buyer. Some builders prohibit assignments entirely or only permit them after a certain project stage.
Ontario tax implications matter significantly. The original buyer may owe land transfer tax on the assignment if the contract includes a price increase between the original purchase price and the assignment price. Capital gains tax can also apply if the assignment generates profit, though primary residence exemptions may apply. The new buyer typically pays land transfer tax based on the final purchase price, though timing and circumstances affect this calculation. HST considerations vary depending on whether the builder qualifies as a registrant and the property's classification.
Assignments happen frequently in the pre-construction market when buyers want to exit their contracts, market conditions shift, or investors seek quick profits. Working with builders and agents familiar with new construction helps navigate consent requirements and tax obligations correctly.