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 deposits they already paid to the builder plus the agreed profit (the assignment price minus the original price). At final closing the assignee pays the builder the balance of the original purchase price. 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, assignment sales of newly constructed or substantially renovated residential housing in Canada are taxable for GST/HST purposes. HST generally applies to the consideration paid for the assignment, but an amount that reimburses the assignor's deposit to the builder can be excluded when the assignment agreement states that portion separately in writing (CRA GST/HST Info Sheet GI-120). The assignor charges HST on the profit, payable on top unless your agreement says the price includes HST. HST on the home and rebate eligibility depend on your situation. Ontario’s 25% Non-Resident Speculation Tax can apply if you are not a Canadian citizen or permanent resident, and federal rules restrict purchases by non-Canadians. This is general information, not tax advice — confirm with your lawyer and a tax professional.

It depends on your original intent when you signed the purchase agreement. Under the residential property flipping rule, purchase rights held for less than 365 days generally produce business income, unless a listed life-event exception applies, such as death, separation, job loss or relocation. Ask your tax adviser about your circumstances. 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.