Invest smart, and learn about assignment condos.

By: Gloria Yeung

Invest smart, and learn about assignment condos.

Tags: #AssignmentCondos


Invest smart, and learn about assignment condos.
Buying a contract through assignment gives you the opportunity to avoid excessive competition and often means you pay less than you would for a resale unit in a bidding war situation. The assignment condo market can sometimes be mutually beneficial for both the buyer and the seller.

What is an assignment?

An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract. The Buyer of an assignment is essentially stepping into the shoes of the original purchaser.

The original purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.

Why would someone want to assign their condo?

Often with pre-construction sales, there is a long time lag between when the original contract is entered into, when the buyer can move in (interim occupancy period*) and the final closing. It is not uncommon for a Buyer’s circumstances to change during that time. What worked for a Buyer’s lifestyle at time of purchase does not always work come closing time.

Another common reason is financial. Sometimes, the original purchaser does not have the funds or cannot get the financing to complete the sale, and it is cheaper to assign the contract to a new purchaser, than it is to renege on the sale.

Lastly, assignment sales are also common with speculative investors who buy pre-construction properties with no intention of closing on them. In these cases, the investors are banking on quick price appreciation and are eager to lock in a profit now, vs. waiting for the original closing date.

*Interim occupancy period: - The period of time between the building being green-lighted for occupancy and it being registered is known as the interim occupancy period when owners move in (and investors start renting out to tenants) but do not technically own their units yet.

What are the main differences between a resale and an assignment?

The biggest difference is that when you are buying resale you are buying real estate. The property exists and it is registered in the land registry system of Ontario. When you buy an assignment, you are really just buying a piece of paper, the contract that in turn gives you right to own real estate once the building is completed and is entered into the land registry system.

Practically speaking, dealing with resale is a much more tactile experience because you can see / feel / touch the property, where as dealing with assignments is more similar to buying pre-sale / buying from plans.

Resale requires a mortgage, and closing dates are usually 60-90 days. Assignments do not require a mortgage up front, but they usually require more capital (35%+), and closing dates can vary from months to years depending on how the agreement is structured and how far along the project is in construction.

Risks for Buyers / Assignees
  • When you buy an assignment, you take on all the terms and conditions that the original purchaser agreed to – so if he or she did not get a lawyer to approve the agreement, for example, those risks are passed onto you. While you can have your lawyer review the terms they agreed to, you typically cannot renegotiate them.
  • You also take on the usual risks of buying a pre-construction condo: time delays, changes to the unit or building, extended interim occupancy periods, etc.
  • Because it is a new construction condo, HST may apply. If you do not move into the unit, you will be responsible for paying HST on closing.
  • When a condo is assigned to you, you generally have to mirror the deposit that the original purchaser has paid to date. So rather than providing the usual 5% deposit for a resale condo, you may be required to provide 15% of even 20% as a deposit. If you are a first-time buyer with a lower down payment, you may not be able to afford the deposits required for an assignment.
  • When the unit is officially registered, and you close on the purchase, you will be responsible for all sorts of closing costs that do not apply to resale units. These ‘builder adjustments’ apply to all new construction projects and include development and education costs, HST on appliances, utility connections fees, and Tarion fees. These builder closing costs can easily amount to 1-3% of the original purchase price. If you are looking at taking over someone else’s contract via an assignment, look to see if the original purchaser capped the amount of these costs when they originally negotiated the unit. Otherwise, make sure you have money put aside for closing costs.
  • Legal fees to purchase an assignment condo are usually generally higher than typical resale condo purchases. For a condo under $500K, plan on legal fees around $2,500 (vs. $1,800 for a resale).
  • When you close on the actual purchase with the builder, you will need to pay land transfer tax.
Advantages for Buyers / Assignees
  • You get to live in a brand new unit and do not have to wait for 4 - 5 years when you buy from pre-construction. Depending on what stage of construction the condo is in when the contract is assigned to you, you may be able to be involved in selecting finishes and upgrades.
  • If the original buyer cannot close and is desperate to assign the unit, you may be able to negotiate the price down significantly.
  • With an assignment, you will be eligible for the Tarion warranty program, which provides years of warranties against defects and problems with your condo, and because all the appliances will be new too, they will also be covered by warranties.
  • Going through the assignment process can be a great way to purchase a condo in a building that has no remaining inventory, and often the actual purchase price (before closing costs) is lower than it will be once the building has registered, and the condos are offered for sale in the resale market.
Want to learn more? Let us know and we'll send you a package with more assignment condo information
I Would Like To Learn More About Assignment Condos
Here are some amazing assignment opportunities!

DKT Condos (Kitchener)

Frederick & Duke St.
Tallest residential building
2 Bedrooms
Asking Price: $390k

I Would Like To Receive Brochure and Floor Plans for DTK Condos
Other Opportunities
Massey Tower 

197 Yonge St.
1 Bedroom +1 Den, West facing
Asking Price: $668k
Contact for more details
Dundas Square Gardens

199 Dundas Street E at Jarvis.
Bachelor unit on high floor
Asking Price: $375K.
Contact for more details
King Blue Condos

King Street West and Blue Jays Way.
Well laid out Bachelor unit on high floor
Asking Price: $390K. 
Contact for more details
50 Wellesley Condos
Yonge and Wellesley.  
1 Bedroom + 1 Den on high floor, East facing
Asking Price: $590K 
Contact for more details
Monde Condos

Queens Quay E at Sherbourne.
2 Bedroom, 2 Bath corner unit with large terrace, Parking and Locker included.
Asking Price: $780K
Contact for more details

River City 3 Condos

170 Bayview Ave.
2 Bedroom, 2 Bath with Parking, South facing
Asking Price: $760K. 
Contact for more details