Assignment Sale in North York: Buying or Selling a Condo Contract

What an assignment is

Say you signed a purchase agreement with a builder for a North York condo that has not been built yet. A few years on your plans change. An assignment sale lets you pass that agreement to someone else, who steps in and completes the purchase with the builder. You are selling a contract. There is no finished unit yet.

Two terms come up. The assignor is the person selling the agreement. The assignee is the person buying it. Everything else, including whether the builder lets you do this at all, comes from the agreement itself. Your agreement sets the terms. We always ask to see it before we say anything about what is possible.

For background on the first purchase, read our North York pre-construction condo guide. This page covers the second sale.

Buying an assignment

As an assignee you pay the assignor for their position and then close with the builder. You take on the builder’s contract as it is written, so you are buying its deposit schedule, its closing date and its terms along with the unit.

Read the original agreement before you read the price. Ask for the assignment agreement and any builder consent in writing. Ask what has been paid to the builder so far. Ask whether a Tarion deposit is in place. A lawyer should read every one of these before you commit.

Look at the price in two parts. One part repays the assignor for deposits already paid. The other is whatever the two of you agree on top of that. That split matters for HST, which is covered below.

Then look at where the unit sits. Our guides to Yonge and Sheppard and Willowdale show which communities and transit stations are around two of the busier North York areas. A listing search on our condo listings page shows what resale units cost in the same area, which gives you something to compare the offer against.

Steps for a buyer

1. Get the original agreement, any amendments and the disclosure documents.
2. Have a lawyer confirm the builder allows the assignment and what it requires.
3. Check what the assignor has paid and how the deposit is held.
4. Ask a mortgage professional what you can borrow on the closing date, not today’s date.
5. Ask an accountant how HST and any new housing rebate apply to you.
6. Price the closing costs, including land transfer tax and compare the total against other options.
7. Sign the assignment agreement only after your lawyer has approved it.

Selling an assignment

As an assignor you need three things in order: the right to assign, a buyer and a price that makes sense after tax. Start with the agreement. Whether the builder must consent, what it charges and what conditions it sets all come from your contract. We do not quote typical fees because no source we trust sets one. We would rather you read your own paper.

Once your lawyer confirms you can assign, the sale works like any other. We help you price it, list it and show it. The buyer needs time for their own lawyer and mortgage review, so allow for that before closing.

Your cost side deserves attention. Think about the deposit you paid, any amount owing to the builder, legal fees and the tax on the sale. The next section covers the tax. An accountant should look at your figures before you accept an offer.

If you are still deciding whether to sell the contract or close and hold the unit, our investing guide covers the rules for renting and the other costs of owning a condo.

Steps for a seller

1. Have a lawyer read the assignment clause and confirm what the builder requires.
2. Ask the builder in writing what consent and fees apply.
3. Add up what you have paid in deposits and what remains owing.
4. Ask an accountant how GST/HST applies to the sale and who collects it.
5. Agree a price and have the lawyer draft the assignment agreement.
6. Record the deposit repayment in the assignment agreement in writing.
7. Hand over the documents and stay in contact through to closing as your lawyer advises.

HST on an assignment sale

This is the most common surprise. The CRA says that effective May 7, 2022 all assignment sales of newly constructed or substantially renovated residential housing are taxable for GST/HST. The CRA’s later notice says the assignor would generally continue to be responsible for collecting the GST/HST and remitting the tax.

There is a carve-out for deposits. Where the assignment agreement states in writing that part of the price reimburses a deposit paid under the purchase agreement, the CRA excludes that part from the taxable amount. The statement has to be in the agreement. Ask your lawyer to put it there.

On the buyer side, the CRA’s guidance says only one new housing rebate application can be made per home. An assignee may qualify if they meet the conditions. Federal and Ontario rebates each have their own caps and dates. The standing federal rebate is 36% of the federal part of the HST to a maximum of $6,300, phased out between $350,000 and $450,000. The standing Ontario rebate is 75% of the provincial part to a maximum of $24,000. Other first-time buyer and temporary Ontario relief exists. Its terms change, so we do not promise any amount. Check the current CRA pages and confirm with an accountant what applies to you.

Deposits and Tarion cover

Builders of condominiums must hold deposits in trust. Tarion says that if a deposit was not placed in trust or is not returned, its protection for a condominium unit is up to $20,000. That cover extends to payments for upgrades and extras within the limit. Payments made only to reserve a unit before a purchase agreement is signed are not protected.

For an assignee, the question is what has been paid, where it sits and how it carries over. Ask your lawyer to trace it before you hand over money. For an assignor, the deposit you paid is part of the arithmetic of your sale.

Land transfer tax at closing

A condo in North York is in the City of Toronto, so a buyer pays both the Ontario land transfer tax and the Toronto municipal land transfer tax. Both are tied to the value of the transfer. For a new condo they come due at final closing when the transfer registers.

Ontario charges 0.5% up to $55,000 and 1.0% from there to $250,000. It then charges 1.5% to $400,000 and 2.0% above that. Toronto uses the same steps up to $400,000. Both have first-time buyer refunds, up to $4,000 in Ontario and up to $4,475 in Toronto, each with conditions.

On an assignment, which party pays what and on what amount comes from the agreements and the way your lawyer structures the closing. Confirm it with a lawyer before you commit. For a general estimate, use our land transfer tax calculator.

Mortgage rules

Federal rules set the minimum down payment at 5% of the first $500,000 of the price and 10% of the portion from $500,000 to under $1.5 million. At $1.5 million or more it is 20%. Insured mortgages are available on homes under $1.5 million. All buyers of new builds can use a 30-year insured amortization.

Your lender looks at the full purchase, so lenders may treat the amount paid to the assignor and the remaining balance with the builder differently. Ask a mortgage professional before you make an offer. Our condo buying guide explains the rest of the mortgage and closing process.

Non-resident buyers

Ontario charges a 25% Non-Resident Speculation Tax on foreign nationals, foreign corporations and taxable trustees who buy residential property. Condominium units are included. A rebate exists if a foreign national becomes a permanent resident within four years. Federal restrictions on foreign buyers may also apply. Confirm your position with a lawyer first.

Where we come in

We can look at the listing, the building area and the comparable resale units. We cannot give legal or tax advice. We will say so when a question belongs with your lawyer or accountant. If you have an agreement in hand and want to talk it through, contact us. If you are looking at nearby areas, read the guides for Yonge and Finch and Don Mills and Sheppard.