What Is an Assignment Sale?
An assignment sale occurs when the original buyer of a pre-construction property (the "assignor") sells their purchase contract to a new buyer (the "assignee") before the property is built and registered. The assignee steps into the original buyer's position and assumes all rights and obligations under the purchase agreement.
Essentially, you're buying the right to purchase a property — not the property itself. The final closing with the builder still happens; the assignee just takes the original buyer's place at that closing.
Why Do Assignment Sales Happen?
Common reasons a buyer needs to assign their contract:
- Financial circumstances have changed and they can no longer close
- They want to take profit before the final closing (especially if prices have risen)
- They're moving out of the country or province
- The project has been delayed significantly
- They want to avoid the HST implications of closing a property they don't plan to live in
Does the Builder Need to Allow an Assignment?
Yes. The original purchase agreement must allow assignment. Many builders include a clause permitting assignment, usually for a fee of $1,000–$100. Some agreements restrict assignment entirely or require builder consent. Always check the purchase agreement before attempting to assign.
How Assignment Sales Work — Step by Step
- Step 1: Original buyer (assignor) lists the assignment (often off-MLS)
- Step 2: New buyer (assignee) reviews the original purchase agreement and terms
- Step 3: Both parties sign an Assignment Agreement
- Step 4: Builder grants consent (and collects assignment fee)
- Step 5: Assignee pays deposit to assignor (reimbursing deposits already paid)
- Step 6: Assignee pays any profit/premium to assignor above deposit value
- Step 7: At final closing, assignee closes with builder as the new buyer
HST on Assignment Sales in Canada
Since 2022, HST must be charged on the profit portion of assignment sales in Ontario. This is a significant tax change. The CRA treats the profit (sale price minus original purchase price and deposits) as taxable for HST purposes. The assignee typically pays HST on this profit amount.
Capital Gains vs Business Income
For the assignor, profit on the assignment is taxable. The CRA may treat it as:
- Business income (100% taxable) if you regularly flip pre-construction contracts
- Capital gains (50% taxable inclusion rate) if it was a one-time investment
There is no clear bright-line rule. The CRA looks at intent, frequency, and surrounding circumstances. Seek tax advice before assigning.
Risks for Assignees
- Taking on all obligations of the original purchase agreement, including levies and development charges
- Limited recourse if the builder delays or cancels the project
- Difficulty getting a mortgage on an assignment (some lenders won't finance them)
- Less time to arrange financing before closing
- Hard to inspect a property that doesn't exist yet
Frequently Asked Questions
Is an assignment sale the same as a resale?
No. A resale involves a built, registered property. An assignment sale involves a contract for a property that isn't yet registered — you're buying the right to buy, not the property itself. The final transfer of title still happens with the builder at a later closing date.
Can I get a mortgage for an assignment purchase?
Some lenders will finance the closing of an assigned unit, but they typically won't finance the assignment premium paid to the assignor. You need cash for the deposit reimbursement and any profit portion, then arrange a standard mortgage for the final closing with the builder.
Where do assignment sales get listed?
Many builders prohibit listing assignments on the MLS. Assignments are often marketed through real estate agents' private networks, dedicated assignment listing websites, or social media groups. Ask a realtor who specializes in pre-construction for connections to assignment listings.
Is there a cooling-off period for assignment sales?
No. The 10-day cooling-off period applies only to the original purchase agreement signed with the builder. Assignment agreements typically have no statutory cooling-off period. Once you sign the assignment agreement, you're committed.
What happens if the builder cancels the project after I bought an assignment?
If the builder cancels, the assignee's rights depend on the original purchase agreement. In Ontario, Tarion's Delayed Closing Warranty and builder insolvency protection cover certain losses for the registered buyer — which after a valid assignment is the assignee. However, recovery for assignment premiums paid above the original purchase price is complex and may not be covered.