What You Need to Know About Assignment Sales 

The Ottawa real estate market has seen rapid growth over the past few years, and with it, a surge in assignment sales, especially in pre-construction condos and new build homes. Whether you’re an investor, a first-time homebuyer, or a seller looking to assign your purchase contract, it’s important to understand how assignment sales work in Ottawa and what legal and financial risks may come with them.

So, what exactly is an assignment sale? An assignment sale occurs when the original buyer of a pre-construction property sells their rights and obligations under the Agreement of Purchase and Sale to a new buyer before the property is built and registered. The new buyer, known as the assignee, takes over the contract, including the closing obligations.

Assignment sales in Ottawa are becoming more popular due to long build times and rising property values. They can be a great opportunity for buyers to secure a property in a competitive market and for sellers (assignors) to profit from their initial investment. However, these transactions are legally complex and require the help of an experienced Ottawa real estate lawyer to navigate properly.

One of the first challenges in an assignment sale is determining whether your contract allows it. Many builders restrict assignment rights or charge high administrative fees, some as much as $5,000 or more. You may also need written consent from the developer, and the process can take time. If you’re the seller, it’s essential to have your Agreement of Purchase and Sale reviewed by a real estate lawyer before you attempt to assign it.

For buyers entering into an assignment deal, there are key considerations as well. Unlike a typical resale purchase, you’re often agreeing to a contract you didn’t negotiate, and in many cases, you won’t be able to view the completed unit before closing. This makes due diligence critical, especially when buying a pre-construction condo through assignment. It’s also important to understand the financial responsibilities you’re taking on, including the original deposit, any assignment fees, occupancy fees (for condos), and closing costs.

Another major factor is taxation. The CRA considers the assignment of a residential purchase contract to be a taxable supply, meaning HST may apply to the deposit, the profit portion, or even the entire assignment amount. This can significantly affect your net proceeds as a seller or your total cost as a buyer. Assignment sales are now being watched more closely by tax authorities, making proper legal and accounting advice essential.

Financing can also be a hurdle. Many lenders are cautious when it comes to assignment purchases, particularly if the property hasn’t been registered yet. This may limit your financing options or delay your mortgage approval. It’s crucial to work with a mortgage broker who has experience with assignment sales in the Ottawa area.

Ultimately, while assignment sales can be profitable or provide access to properties that are otherwise sold out, they’re not simple transactions. Whether you’re buying or selling, working with a qualified real estate lawyer in Ottawa is your best protection. We help ensure your contract is enforceable, that you understand your rights and obligations, and that your transaction closes without unwanted surprises.

The content on this post is for information purposes only and is not legal advice, which cannot be given without knowing the facts of a specific situation. You should never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. The use of the website does not establish a solicitor and client relationship.