Assignment sale어사인먼트 매매, 분양권 전매

What is it?

When you sign for a pre-construction condo or new home, you do not own a home yet. You own the right to buy one. Title passes only at final closing, after the building is finished. Transferring that whole bundle of rights and duties under the contract to someone else before then is called an assignment.

The original buyer is the assignor; the person taking over is the assignee. The assignee steps into the original contract with the builder, pays the builder the balance at final closing and receives title. There is no new contract between the builder and the assignee; only the buyer changes.

The Condominium Authority of Ontario’s guide describes an assignment as a transaction where the buyer of a pre-construction unit transfers their purchase agreement to a new buyer before taking ownership, and says it may be possible before or during interim occupancy.

The builder’s consent and conditions

Assigning is not an automatic right. Whether you can, and on what terms, is set by the original agreement (APS). The CAO guide names builder consent, a fee and the original buyer staying liable for closing as common conditions. Some contracts add others, like the 4th and 5th items below, so check yours.

• The builder’s written consent is required. The builder may refuse, which stops the deal.
• An assignment fee is charged. The amount is in the contract and varies by project. Builders may also ask you to pay their lawyer’s costs.
• The original buyer (assignor) stays liable for closing. If the assignee fails to close, the builder can come after the assignor.
• Advertising limits: some contracts restrict MLS listings or public advertising. Check the contract and get the builder’s written permission before you advertise. An agent’s ad must name the brokerage and be accurate (RECO advertising rules).
• Other conditions can include "only after a certain percentage is sold", "only before interim occupancy", or the assignee passing the builder’s checks.

Section 80 (6) of the Condominium Act lets the builder withhold consent to an assignment of the right to occupy during interim occupancy and charge a reasonable fee for consenting. See "Interim occupancy".

How the money flows

The assignment price usually has two parts. The assignee pays the assignor (1) a reimbursement of the deposits the assignor has already paid to the builder, and (2) the difference between the original price and today’s price, which is the assignor’s profit. The balance owed to the builder stays as it was and is paid by the assignee at final closing.

Illustration only. When the reimbursement and the profit are paid (at signing, at builder consent, at final closing, or split) is negotiated and written into the assignment agreement.

HST applies

Section 192.1 of the federal Excise Tax Act treats the assignment of a new home or condo purchase agreement by anyone other than the builder as a "taxable supply". So HST (13% in Ontario) applies to the assignment price. The section was added by a 2022 amendment (2022, c. 10, s. 52). Under subsection 52 (2) of that amending Act, it applies to assignments made after May 6, 2022, that is, from May 7 on.

There is one relief: if the assignment agreement states in writing that part of the price is a reimbursement of the deposit paid under the original contract, that deposit part is excluded from the HST calculation (section 192.1 (b)). This is why the assignment agreement must separate the deposit reimbursement from the profit. In the example above, HST applies to $80,000, not $170,000, giving $10,400.

Who collects and remits the HST, and how the HST the assignee pays the builder at final closing and the new housing rebate work, depend on each side’s situation. Talk to an accountant before you sign an assignment agreement. See "HST new housing rebate" too.

Income tax: the 365-day flipping rule

Section 12 (13) of the federal Income Tax Act treats a "right to acquire a housing unit" that you held for less than 365 days as a flipped property. The profit is then fully taxed as business income, not as a capital gain (where only part is taxed), and the principal residence exemption cannot be used. Only the exceptions written in the Act, such as death, separation, serious illness or a job relocation, are excluded.

Holding the right for more than 365 days is no guarantee either. If you bought intending to resell, the profit can still be business income on the facts. See "Property flipping rule" and talk to a tax professional before you file.

What the buyer (assignee) should watch

• You inherit the original contract as it is. Read the occupancy dates and critical dates, the closing adjustments (development charges and other levies) and whether they are capped, the interim occupancy fee, the upgrades and every amendment, with your lawyer. If the contract has no cap, you inherit that risk.
• The deposits stay in trust with the builder’s lawyer, but the money you pay the assignor is not trust money. Decide in the assignment agreement how it will be protected (a lawyer’s trust account, payment timing).
• The 10-day cooling-off period under the Condominium Act belongs to the original purchaser who received the disclosure documents from the builder. Ask your lawyer whether you, as assignee, have any similar right under your agreement.
• At final closing you pay the land transfer tax (plus Toronto’s municipal tax in Toronto), HST, the closing adjustments and legal fees. Ask your lawyer how the assignment price is treated in the land transfer tax calculation.
• The federal foreign buyer ban and Ontario’s Non-Resident Speculation Tax may apply depending on your status. Ontario has transitional NRST rules for assignments entered into on or before October 24, 2022.
• The Tarion warranty stays with the home for up to 7 years even if it is sold. How pre-possession coverage such as deposit protection and delay compensation applies to an assignee is something to confirm with Tarion.
• Mortgage: lenders may value the unit at the assignment price or the original price, which changes the down payment you need. Check with a mortgage professional early.

What the seller (assignor) should watch

• Start with the assignment clause in your contract: whether it is allowed, the fee, the advertising limits and any timing limits. Get the builder’s written consent first.
• If the assignee fails to close, the liability can come back to you. Check the assignee’s ability to pay (pre-approval, deposit) and require a deposit from the assignee in the assignment agreement.
• Plan the taxes first. After HST on the profit and income tax (possibly as business income), what you keep may be much less than you expect.
• If you sell through an agent, the advertising must be accurate and name the brokerage. Putting the contents of an agreement, such as the price, into an ad needs the written consent of the parties (TRESA General regulation, O. Reg. 567/05, s. 12.1 (10)).
• Write the deposit reimbursement and the profit as separate amounts in the assignment agreement so the deposit is excluded from HST.

Example