What is an Assignment. An assignment is a sales transaction where the original buyer of a property allows another buyer to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes the deal. In other words, an assignment clause allows the buyer of a home to sell the place before they take possession of it.
In Ontario, assignments are more common in pre-built homes and condos than on re-sale properties, but they are possible on any type of trade.
Are assignments legal? When done properly, assignments are legal and can be a useful tool for buyers and sellers. For instance, someone could buy a condo that is still under construction and might not be ready for a couple of years. The buyer’s work or family situation could change during that time, causing them to change their mind about living in the condo they purchased. Another example may be where a buyer runs into financial difficulties to close on an existing house and wants to find another buyer rather than risk the financial penalties that might come with having to try to back out of the deal. Assigning if agreed to by the Seller allows the buyer to pass along the contract to another buyer.
What about the tax implications of assignments? Real Estate Council of Ontario advises anyone participating in an assignment to seek the advice of a tax specialist. Generally, assignors can expect to pay tax on any profits they realized from the assignment. Land transfer taxes are paid by the assignee, as they are only due when the sale closes -that is when the property actually changes hands.
The Brokerage would have to inform the Seller. The Seller could then make an informed decision about whether to include an Assignment Clause in the Agreement of Purchase and Sale.
The Seller’s Real Estate Representative is expected help the Seller weigh the pros and cons of giving the buyer the ability to Assign the property to another buyer.
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