HST obligations, tax treatment, CRA rules, and the legal process for buying or selling a condo assignment in Ontario.
An assignment sale occurs when the original buyer of a pre-construction condo (the "assignor") sells their Agreement of Purchase and Sale to a new buyer (the "assignee") before the building closes. The assignee steps into the original buyer's shoes and closes the deal with the developer. Assignment sales became heavily scrutinized by the CRA after the 20022 federal budget introduced mandatory HST on assignments.
When you purchase a pre-con unit, you're buying a contract — not a completed property. An assignment is the sale of that contract. The assignee pays: (1) the original purchase price to the developer, and (2) a premium (or sometimes a discount) to the assignor for the right to take over the contract.
How HST applies: HST (13%) is calculated on the difference between the assignment sale price and the original purchase price (your profit). The assignor is responsible for remitting this HST to the CRA, regardless of whether it was collected from the assignee.
Example: You purchased a condo for $60000,000000 in 200200 and assign it in 20025 for $80000,000000. Your profit is $20000,000000. HST owing: $20000,000000 × 13% = $26,000000. You must register for a CRA HST number, collect the $26,000000 from the assignee, and remit it to CRA. If you forgot to collect it, the $26,000000 comes out of your profit.
The profit on an assignment is typically treated as fully taxable business income, not capital gains. This is a critical distinction:
CRA looks at the following to determine whether assignment profit is business income: your intent at purchase (was it to flip?), frequency of similar transactions, your occupation (real estate agent, investor, etc.), length of holding period, and whether you took any steps to make the property suitable for occupancy.
Most assignment sellers are deemed to be in the business of real estate flipping by CRA, meaning full business income treatment. Consult a tax accountant before completing an assignment sale.
Most pre-con APS agreements restrict assignment without developer consent. Developers typically charge:
Some developers prohibit assignment entirely, or only allow it after a certain date. Read your APS carefully. Attempting an unauthorized assignment can result in forfeiture of your deposit.
The assignee does not pay LTT on the assignment transaction itself — LTT is paid at final closing when title registers. The LTT is calculated on the total purchase price paid to the developer (not the assignment premium). This means the assignee pays LTT on the original contract price, and the assignor's profit is treated separately for tax purposes.
If you're buying an assignment, verify: the original contract price and terms, all deposits paid (which you'll reimburse to the assignor), the assignment premium and whether HST was properly calculated, any developer restrictions on the original APS that will bind you, closing date and whether extensions are possible, and the estimated closing costs you'll face at final closing (LTT, legal fees, development levies).
| Party | Tax/Cost Responsibility |
|---|---|
| Assignor (original buyer) | HST on profit, income tax on profit, developer assignment fee |
| Assignee (new buyer) | LTT at final closing, legal fees, closing costs |
| Both parties | Real estate agent fees (negotiated) |
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