Assignment Sales in Ontario

An assignment sale is when the original pre-construction buyer (assignor) transfers their Agreement of Purchase and Sale to a new buyer (assignee) before the unit is completed. The assignee takes over the contract and completes the purchase with the builder at closing. You step into the original buyer's position and pay the assignor for their interest plus any assignment fee.

The assignor and assignee sign an assignment agreement. The builder must typically consent to the assignment. The assignee pays the assignor the agreed price (often original purchase price plus deposit paid, plus a premium or assignment fee). At final closing, the assignee completes the purchase directly with the builder and takes title to the unit.

The assignment fee is the amount the original buyer (assignor) asks above their costs (e.g. original purchase price and deposits paid). It may also include a fee charged by the builder for consenting to the assignment. This is separate from your closing costs and is paid to the assignor (and sometimes the builder) as part of the assignment transaction.

Since May 7, 2022, all assignment sales of newly constructed or substantially renovated residential housing in Canada are taxable for GST/HST purposes. The HST generally applies to the assignment fee/profit portion (the assignor's margin), not to the deposit reimbursement. Whether you also pay HST on the home itself, and any rebate eligibility, depends on your intended use — always confirm with a tax professional and your lawyer.

It depends on your original intent when you signed the purchase agreement. If you intended to live in or hold the property, the profit may be treated as a capital gain (50% taxable). If you intended to resell for profit, the CRA may treat it as business income (100% taxable). The federal anti-flipping rules can also deem short holds to be business income. Get professional tax advice before assigning.

Most purchase agreements allow the builder to approve or refuse an assignment, and many require their written consent and charge an assignment/administration fee. Some agreements permit only a single assignment. If the builder refuses, the assignment cannot proceed. Always confirm assignment is permitted and obtain builder consent before finalizing the assignment agreement.