Assignment of the Agreement of Purchase and Sale. Overview
In an assignment, one party (the ‘assignor’) hands over their property rights to another party (the ‘assignee’). This usually happens before the property is finished and is based on the first agreement between the initial buyer and the property developer.
While you can hand over rights, you can’t pass on responsibilities from the original contract. So, if the new buyer (assignee) doesn’t fulfil their part, the original seller (assignor) must step in. It’s important to know that the developer stays as the legal owner of the property until it’s finished and the title is officially transferred.
Usually, getting approval for an assignment from the developer involves some fees, which the assignor typically covers. When buying or selling in an assignment, it’s crucial to check all agreements carefully to make sure all rights are safeguarded. Sometimes, developers offer perks to the first buyer, like capped fees or free upgrades. Make sure these benefits can be transferred to the new buyer. Here at MBLAW, we make sure all the benefits agreed in your assignment purchase are correctly passed on to you.
Assignment of the Agreement of Purchase and Sale Process: A Step-by-Step Guide
Over the years, we’ve scrutinized a multitude of assignment agreements. We understand the intricacies of the process and aim to safeguard our clients’ interests. Although assignments are commonly understood as purchases from investors or individuals who decide to sell their property before its completion, they can also involve resale properties, provided the right to assign is embedded in the original agreement of purchase and sale. Regardless of the situation, the assignee must furnish proof of funds, their capacity to conclude the transaction, possibly an additional deposit, and compliance with any Federal/Provincial restrictions on property purchases. At MBLAW, we’re here to assist you with your assignment purchase and sale.
Please complete our contact form, specifying whether you are buying or selling a property via an assignment.
A member of our team will reach out to determine the assignment deadlines and confirm our ability to accommodate them.
Once we have verified our capacity to meet the specified deadlines, we will forward our retainer agreement and request a retainer fee of $400.
We will scrutinize the original agreement of purchase and sale along with the assignment agreement to ensure all negotiated aspects are included.
We will schedule a meeting with a lawyer to discuss our findings and the deposit structure of the assignment agreement. If the builder’s consent has already been obtained, this document will also be reviewed and executed during this meeting.
Assignment of the Agreement of Purchase and Sale: Frequently Asked Questions
The process of acquiring the builder’s consent for an assignment begins once the assignee verifies the assignor’s right to assign. In cases where the original agreement of purchase and sale forbids assignment and the builder refuses to allow it, the original buyer must wait until the title is transferred to them to sell their property. However, in many instances, builders may waive the clause preventing assignment from the agreement once their specific criteria, forms, and fees are met. Both the builder’s lawyer and the sales office typically have information regarding the builder’s requirements for consenting to an assignment sale.
After taking over the assignment agreement, the new buyer pays the builder the adjustments at the closing. The timing of this closing is contingent on the property’s construction status. If the property is a pre-construction condo, the buyer can occupy the unit once the occupancy closing takes place and is responsible for the occupancy fees thereafter. Upon final closing, the new buyer must arrange for a mortgage if necessary. Furthermore, the original buyer’s deposits to the builder are taken over by the new buyer and reimbursed once the builder consents to the assignment or at the time of title transfer.
Purchasing a property through assignment has its own set of benefits and drawbacks. The pros include the opportunity to purchase a property in a sold-out project and potential equity growth. However, the cons include uncertainties in final adjustments and closing costs, the obligation to fulfil the previous owner’s responsibilities, and the wait for the property’s completion.
If you’re purchasing from a builder/developer, it’s crucial to refer to the original agreement of purchase and sale to ascertain when the builder will consent to assign. Some builders will only give consent to assign after certain criteria are met, such as the sale of 90% of the units in the building. Therefore, reviewing the original agreement is important to understand your rights.
Generally, most builders explicitly state in the agreement of purchase and sale that you cannot list the property for sale or lease on MLS. While you can request consent from the builder to list on MLS, you also run the risk of facing heavy penalties or potential termination of your agreement, with the loss of your deposit, if you list without consent.
The purchase price on the Agreement of Purchase and Sale with the builder typically includes HST and an HST New Housing Rebate. However, in some instances, the builder might not credit the HST New Housing Rebate on closing due to an Assignment, regardless of the Assignee’s/Purchaser’s eligibility. In such a case, you would need to pay the rebate to the builder as an adjustment on final closing and apply to the CRA for the HST New Housing Rebate yourself after final closing.
If you’re purchasing on Assignment for investment purposes, you must obtain an HST Rental Rebate. This entails entering into a lease with a tenant for a minimum of one year and applying for the HST Rental Rebate within two years of your final closing.
If the assignor used the property for rental purposes after taking possession on occupancy, it could affect your eligibility for the HST New Housing Rebate. It’s crucial to confirm that the assignor has not rented out the property to maintain your eligibility.
If the assignee fails to fulfill their obligations, the assignor (the original seller) remains liable to complete the transaction. This underscores the importance of the assignee providing proof of their ability to complete the transaction when taking over the agreement.