The Realty Bulls

Assignment Sale - Condo Apartment - FAQs

A.   What is the first step for the Assignor (seller) when you are considering assignment?

Determining if the Builder will allow you to assign and under what conditions and restrictions. Check your Purchase Agreement under the section called "assignments". Often, they will want to be almost sold out, e.g.; 90% and have all the deposits paid except for the final occupancy deposit. 

Warning: Builder Agreements seem to imply that if you meet their rules, e.g; 90% sold out, you are good to go. I wish. Almost always they reserve the right to deny you this option if they so choose. ALWAYS, talk to the Builder's head office personnel responsible for assignments. Do not ask a sale person. If the answer is yes, get it in writing. Get them to send you a fax or email. 

B.   Why would builders not allow assignments?

Builders do not want to compete with current unit buyers for the sale of remaining inventory. If they have sold all their units (or say, 90%) or perhaps just sold all units of your type, they are more inclined to grant permission for assignments as they make a profit on the fees (1% of the original purchase price for example).

C.   When is the right time to assign your condo?

Ideally, your decision should be based on your assessment of the future condo market.

If the market is rising and looks solid for the period before Interim Occupancy, I would suggest you allow at least one Spring and one Fall season between the time you list and when Occupancy is scheduled so that you are likely to have it assigned before Occupancy. This way, you avoid the Occupancy deposit and Occupancy fees but take advantage of getting a better price. It is a risk/reward trade-off.

If you are concerned about the market dropping, then the sooner you list and assign the better.

Remember, if you have a financial concern about not being able to make further deposit payments, then you might want to do it as soon as possible and hope the builder will allow it.

Please note that Assignments may not get you the deposits you have already made back (usually) UNTIL FINAL CLOSING. I have noticed a trend during 2017 where buyers are willing and able to make some or all of the payment BEFORE FINAL CLOSING. In any case, you will be avoiding making any further deposit & occupancy payments once we get it assigned.

If you are in desperate need to get your deposits back before Final Closing, you may incent the buyer with a reduced price. Some buyers will be able to finance the buy without the benefit of a mortgage that cannot be arranged prior to title transfer at Final Closing. will make every effort to find and work with Buyers who can provide Advanced Payments.  

D.   What are the potential benefits to the Assignor (original buyer)?

1.    Not having the make the final deposit (5-10% or more) on the date of Interim Occupancy if assignment occurs prior to this date.

2.    Not having to pay the Interim Occupancy fees (often 3-6 months or longer) plus Hydro (usually) and Condo Insurance costs.

3.    Not having to pay the builder closing costs (as high as 8% of the original purchase price) including those "open-ended" levies. Sometimes these are "capped" by a "will not exceed" amount, e.g.; $3,000.

4.    Not having to pay the Land Transfer Taxes (provincial and Toronto, if applicable).

5.    Getting the Assignor's builder deposits back at Final Closing.

6.    Making a reasonable profit, hopefully, on the market appreciation of the condo unit.  

7.    If you happen to be a first-time buyer, you would retain your status for the next purchase (assigning means you do not take the title so you still qualify) and be entitled to the credits when you do buy and take possession of another property at some later date.

8.    Not having to worry about the HST rebate qualification. This becomes the responsibility of the Assignee. 

E.   What are the benefits to the Assignee (new buyer)?

1.    Faster occupancy as the unit is usually near or at occupancy and often vacant. Can be 3-7 years sooner than buying new (pre-construction) from the Builder. 95% of pre-construction has substantial delays in reaching Occupancy and Final Closing dates.

2.    Enjoy a brand new unit - often never occupied/never rented. Fresh and clean (no pet, smoking, cooking smells, bad decor).

3.    All new warranties (manufacturer's 1-year on appliances and 1 & 5 & 7-year Tarion).

4.    The PDI (pre-delivery inspection) has usually been completed. In some cases, you may get to do this.

5.    All the upgrades and options are decided. In some case, you may get to do this.

6.    Much smaller deposit for a much shorter time than when buying new from the Builder.

7.    Maybe an opportunity to see the unit and building rather than buying from pictures (only applies if interim occupancy has started).  

F.   What is one of the biggest challenges to a successful assignment of your condo?

Selling without the use of MLS. Builder (a.k.a. The Vendor) will almost always NOT allow the property to be listed on MLS and technically restrict the use of all advertising such as Kijiji, and other Internet channels and print media. You need to check your Agreement of Purchase and Sale with the builder to see what conditions they have placed on Assigning your unit as well as the fees if any if they do allow assignment.

G.   What happens after a new buyer has been found and the Agreement is Firm - all conditions waiver?

This is when you submit a request to get formal approval from the builder/vendor to assign your unit to the new buyer. If you are within the terms set by the builder/vendor for assigning (completely up to them to determine this with no appeal possible) then they will accept such a request. They have their own 2-3 page form to complete that identifies the new buyer and states the terms of the Assignment including the need for both Assignee and Assignor* to show proof of credit and ability to obtain the mortgage. After you and the new buyer sign the form and submit it to the vendor, you may have to wait 1-2 weeks to get formal approval or rejection.

* Note: Builder still holds original buyer responsible to close if assignee defaults. They want to be sure the Assignor has the ability to do so. Not sure why they would not be more inclined to have an assignment if the original buyer was in financial trouble and this was the main reason they wanted to assign. I have had a case were the Assignor was in financial trouble and the Builder waived this requirement. They don't like defaults when there are better alternatives.

After the Builder approves the Assignment, the Assignor and the Assignee might meet at the Builder's choice of location to provide additional signatures and for the Assignor to pay the assignment fees (if any). Other arrangements can be made for out-of-country parties. Caution: You need a lawyer and realtor who have experience with foreign buyers and/or sellers. 

Assignor often submits the assignment fee payment with the Builder assignment request. Almost always this is returned if the Assignment is rejected by the Builder.

You do not need to pay the Builder in advance for Assigning your unit. As outlined above, you submit a request to the builder after a new buyer (assignee) has been located and you have a separate, firm Assignment Agreement (TREB/OREA Form 150 for condos) with this new buyer (assignee) that has all conditions satisfied (finance, legal review, etc.) - there is no status certificate because it is not a registered condo and of course, no inspection as it is usually still under construction or not desired (by assignee) as it is completely covered by new home warranty. In other words, you request Vendor (Builder) approval only after you have a firm Assignment Agreement.

H.   Why are some buyers reluctant to do assignments?

Buyers usually have a concern not knowing the date of Final Closing and paying the occupancy fees up to final closing. This fee is similar to a rental cost with no credit towards the purchase price. A typical condo occupancy fee for a 1 bed + den is about $1,400 per month.  Final Closings can occur 4-6 months after Interim Occupancy but Builders do not guarantee this and Final Closing can take much longer. Builders are motivated to get the building registered as a condominium corporation and do the closings as quickly as possible to get their balances owing - delays cost them money.

Assignors could occupy their unit or rent it out but usually, neither is practical to do. For the Assignor, the cost of moving in and out for what may be a very short period (the time it takes to assign) makes this option unattractive. If Assignor rents it out it is harder to show and given a one year lease, the Assignee (new Buyer) would have to assume the tenant - so only investors would now be interested making it harder to assign.  

I.    Are vacant units harder to sell than furnished units?

Yes. Assignors can make use of a specialized staging service that provides furnishings and staging that will usually sell the unit faster (saving occupancy fees) and for a better price. This is only possible for interim occupancy. You can get preliminary estimates by phone and complete quotes at no cost or obligation after our stager visits your unit.

J.   Are there tax considerations for assignments?

YES! When are there not tax considerations?

HST is included in the Price for the assignment. Like a resale, assignments are priced with HST included. 


HST Rebate: We recommend an HST REBATE clause in Schedule "A" that clearly states that the new buyer (Assignee) accepts the responsibility for the HST rebate that forms part of the original purchase price.

If the Assignee does anything after closing to disqualify themselves for this rebate it is their issue, not the Assignor or the Builder's issue. Assignees disqualify themselves for the HST REBATE by selling their units within one year of closing. The HST REBATE can be as high as $27,000 on a $450,000 condo! 

Alert: Builders will almost always demand the HST REBATE  be paid by the Assignor at final closing regardless of their intentions to comply with the HST REBATE rules! Disclosure of this possibility is critical to ensure a successful closing.

Income Tax: Consult a tax expert on this. One of the issues faced by the assignor is the tax implications of the profit (if any) on the assignment being taxed as income or capital gains. This distinction and the way it is determined to make a significant difference in taxes paid by the assignor. Again, consult an expert.

K.   Why do builders sell pre-construction condos at prices that seem to allow buyers/investors to make a profit by flipping or assigning?

Pre-construction prices are generally lower than those of existing condominium resales. This brings up two obvious questions:

1) Why do developers discount the units for pre-construction buyers?

2) Why do they sell pre-construction rather than build first? The answer to both questions is the same--they want to reach 70% sold to get financing from their lenders.

Developers sell pre-construction, even at the lower prices, because they must have pre-sales to get their construction loan. Lenders require 70-80% of a project to be sold before financing a project.

L.   Once I have completed assigning the property, assignors have no further responsibility, right?

Wrong. You are the original buyer of the property and if the second buyer does not complete the purchase, then the developer will then expect the person assigning to close at the original purchase price. In this way, it is quite different from selling property which you own. All you own with an assignment is the Purchase Agreement with the Builder. 

Alert: Technically, the builder can declare the Agreement in default if the Assignor does not close and NOT allow the Assignor the right to complete the deal. This means the Assignor loses their deposit and profit! There are ways to mitigate this risk.

We always recommend a good deposit (5-10% or more) be obtained to protect you (Assignor) from the Assignee backing out of the Agreement (just like a resale). You would also have the right to sue the Assignee for damages - the extra costs incurred by you now you have to close with the Builder. We strive to avoid this happening thru disclosure and fairness in our dealings with BOTH parties to the Agreement.

M.   Are Assignment investments risky?

All investments have risks.

Real estate investments are less risky than many other investments because you have more choices than just selling. If the market has been good since you placed your deposit money, you can assign and take your profits. If the market has not been good, you can move in or rent it out and sell later if you wish. Time and market growth are the two major factors determining your profit.  

N.   Are Condo assignments harder to sell than resales?

Assignments are harder to sell than existing properties (resales) or New (pre-construction) from Builders (on-site sales centre and soft music/site layouts, etc). With Assignments, the condo suite is often still not built so potential buyers cannot book showings. They have to buy from paper and pictures (just like you did) but you (or your agent) don't have a fancy sales centre behind you. Sometimes, assignments take place during interim occupancy so it can be shown to potential buyers.

Also, builders will usually not let you advertise on MLS. They don't want you to compete with their remaining units. You need a good realtor with excellent tools other than MLS, to expose your property to buyers. I have such a system. My success rate is good (about 70% of those listed by me get sold) and I have been doing this since 2006, much longer and more successful than most.

O.   Can financing for Assignees be more challenging when buying an assignment?

Yes. Especially since 2012, when new rules were applied to lenders by the federal government making the qualifications on mortgages tougher to meet. Be advised that lenders may not accept the assignment price as the value they will loan against but will use the original purchase price (the price the Assignor agreed to pay the Builder) and Assignees will need to find a way to cover the gap (2nd mortgage, cash, family loans). Be sure to get pre-approval when shopping for a condo (especially an assignment sale) and always have a financing condition in your offer (unless you are paying cash) for obtaining final approval from your lender based on the specific purchase you are considering.

P. How much money can I expect to make by "flipping" with an Assignment? 

If you get a condo market growth of say, 3% (new condos appreciate slower than resales) and you assign after 3-4 yrs, you will have a gross value appreciation of 9-12%. The closing costs are around 8% (of the new selling price) so you net 4% on the original purchase price and you only invested the deposit (10-20% of the purchase price). So, using a $300K condo as an example, you could have a net profit of from $12,000. You never need a mortgage, you don't have to be a landlord and you don't have to fix-up. 

Disclaimer: The above info is not to be taken as investment advice but simply our view of the factors involved and how they may play out under certain conditions and assumptions. Buyers are expected to consult with experts and come to their own conclusions as to the risks and rewards involved.

Assignment Sale - Condo Apartment

HST Calculation in Assignment Sale

Below information is provided just for a routine reference and you are encouraged to consult your accountant and a legal advisor to clarify and understand individual situation.

Q: Could you explain how Assignments are taxed (other than the HST rebate – dealt with ?

Let’s understand a hypothetical mathematical scenario to explain it much better.

1) Total Purchase Price including Original APS and Assignment Profit: $600,000.00

2) Purchase Price of the Original APS: $470,000.00

3) Deposits Paid by the Assignor to the Seller under the Original APS: $80,000.00

4) Payment by Assignee to Assignor for this Assignment Agreement: $210,000.00

5) Deposits Paid Under this Assignment Agreement: $40,000.00

6) Balance of Payment for this Assignment Agreement: $170,000.00

*Before we get to the tax portion of this post, please note how we came up with these numbers as the math of schedule “B” (Assignment Sale - OREA Form) is ROUTINELY confused by many. The calculation above is as follows: Line 1 (minus) Line 2 (plus) Line 3 (equals) Line 4 (minus) Line 5 (equals) Line 6.


So… to the tax. First, let’s note that tax is always payable on an assignment. The one thing that makes real estate tax free on sale, the principle residence exemption, is not available in an assignment situation as the property has, by definition, never been resided in.

In the normal course of things, sold items can be subject to three types of taxes. Income Taxes, Capital Gains Taxes and Sales Taxes. Let’s talk about how all three of those taxes work.

A) Income Taxes & Capital Gains Taxes

Income taxes are taxes paid on your regular business activities. Your paycheck, any income you earn in the normal course of your business etc. is taxed as Income at your marginal rate of tax (more on this below). Conversely and unlike normal income, Capital Gains tax is a tax on your capital investments and is taxed at half of the rate of Income.  

In English, this means that, using the 2020 tax table attached to this post, if someone is in the top tax bracket of income (earns above $220,000.00 per year) then every new dollar they take in as business income will be taxed at a rate of 53.53% and every new dollar they take in as a result of capital gains will be taxed at a rate of 26.76%. 

B) Sales Taxes (HST)

Whenever you sell anything in Canada to an end user, with the exception of very few things (ie residential property and mortgage broker services), it is subject to retail sales tax (HST). The partially used soap on Craigslist? Used car sales?  Babysitter services? HST applies. Now, I know you are all going to pipe up and tell me that you have been working your midnight candle stand / healing stone business from the back of your sister’s van for years and have never once collected tax on those sales but, before you publicly reveal yourself to the CRA, please understand that not collecting/paying tax and not have a legal obligation to collect/pay tax are very different things. Frankly, the CRA usually just lets small business transactions slide and so you magically think HST is not applicable even though it very much is. Who knew that Patty the babysitter is a crook on the run from the Feds?

The Taxes that Could be Payable

So, having established our basic tax vocabulary, let’s turn our attention back to our original question, what tax is actually payable on an assignment? Well, as you can imagine, given the consequential difference in net profit that results from classifying a sale as income v. classifying a sale as capital, this is a subject of some dispute between tax payers and the CRA. The tax payer always wants to deem the sale of an assignment a capital sale and the CRA always wants to classify it as income. If the CRA is successful, in addition to income rates of tax being levied as against the assignor, the CRA can claim that the assignor is, in fact, a “developer of the land” and that the sale of the contract means that HST is payable on the assignment profit plus, for some reason no sane person really understands, the return of the deposits paid by the assignor to the seller under the original APS.  For those of you who need help with the math, check out the attached math calculation that I am uploading as part of this post.

So, to the critical question. What determines if the Assignor needs to classify this as income tax or a capital gain? Again, a basic tax lesson is necessary before continuing further.

In explaining the difference between what is subject to income tax and what is subject to capital gains, I like to use the example of a certain Apple Farm just west of Toronto.  Many of you with kids will be familiar with the fall activity of apple picking and, specifically, the mad rush to pay farmers $20.00 per bag for the right to allow your children to pick pesticide laden apples (note: employees are trained to say the white powder on the apples are sprayed wax which, frankly, may mean they are eating too many of their own apples). When Mr. Farmer takes his $20.00 per bag from parents who, by that time, are willing to pay anything to just get the heck out of there, s/he needs to pay income tax on that bag of apples. After all, their primary business is selling apples to the public. Similarly, directly up the street from the Apple farm in question is a Christmas Tree farm. Like the apple farmer, the Christmas Tree farmer sells trees for $20.00 a tree and, like with the apples, has to pay income tax on the sales of those trees.

Continuing with our example, let’s say that one day the Apple Farmer decides he has had enough of partnering with Monsanto to poison young children and decides to cut down his apple orchard. He sells the trees for $1,000.00. That $1,000.00 is derived from selling the same product as his neighbour (trees) but, as the trees in question were used for capital purposes – to produce apples – the trees in this instance are a capital sale and thus, a capital gain. The apple farmer’s after-tax profit on the sale of his trees would thus be significantly more than the Christmas farmer’s sale of his trees as the sale of the apple farm trees would be taxed at half the rate of those of the Christmas trees.

So, to conclude this section, I have used a lot of words to get to this point and, more specifically, to get to this critical sentence. In tax, it is the context of the sale that matters to determine what tax is leviable.

The Actual Tax Payable

Okay, let’s bring this post to a head.  What taxes are payable? Well, the CRA’s official position is that what matters is the Assignor’s intention at the time the original agreement was signed. Did the Assignor have the intention of using the unit and deriving rental income or living enjoyment from it? If so, the assignment should be taxed in a manner similar to when the apple farmer when sold their apple trees. If, by contrast, the Assignor purchased the unit and intended to make a profit from the sale of the unit through an assignment, the purchaser’s business would be similar to the sale of the apple farmer selling his/her apples and thus subject to income tax.

Of course, determining taxpayer intent at the time of purchase is the subject of tons of litigation.  In general however, certain truisms do apply. First, the less you assign, the more chance you have at substantiating your claim that the assignment sale was a one off occurrence. Second, life events that can explain assignments (I moved to NYC for med school, got married and moved to England etc) can all be used as evidence in a tax trial that the assignment was not contemplated at the time the purchase was entered into.


As you can see from the above, it is absolutely critical that you consult your accountant and a legal advisor to understand and calculate HST as your individual circumcstances will impact the calculation of HST.  
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