Buying a builder condo at pre-construction or under construction stage is a great way of homeownership. Builders in the Greater Toronto Area usually offer a deposit payment structure that is spread over a few months or few years. So, you as a purchaser, don’t have to pay full down payment upfront.

When the building is complete or nearly complete, you get the key and what is commonly known as “Interim Occupancy Period” begins. Closing of your condo is still a few months away.

In most cases, you will close the transaction and the condo is registered in your name giving you a legal title to your property.

But, if you realize that your circumstances have changed and you are unable to close the transaction with the builder, you may find yourself in a precarious situation. You run the risk of losing your deposit if you are not able to close or worse.

However, there is one possible solution to overcome such a situation: Assignment!

Assignment Explained

In a real estate context, an assignment is a transfer of an interest in the property to someone else. In our case, the assignment of a condo is transferring your interest in the condo to another buyer before the closing date. 

You as an original buyer will transfer the property to another person who will close the transaction with the builder. He then becomes the legal owner of the condo.

How Assignment works

Your right to assignment is stipulated in your Agreement of Purchase and Sale.

An assignee (your buyer) takes over the original purchase agreement and pays you (the assignor) the deposit, which is usually the same as your deposit to the builder, plus a negotiated “assignment fee”. Assignment fee is a mark-up on the original purchase price. This is your profit from the assignment.

The builder will have to approve the assignment.

What happens on the closing date?

Two separate transactions happen on the closing date.

One transaction closes the deal between the builder and the assignee. Assignee pays the balance of the purchase price (through mortgage loan or other sources) to the builder.

The second transaction closes the assignment deal between you the assignor and assignee, if not already completed during interim occupancy. Assignee pays you the deposit amount plus your profit.

If the assignment is completed during interim occupancy then you would have received the deposit and profit before the closing date. The assignee will occupy your condo.

Fees and Charges

You will likely incur real estate commission unless you find a buyer yourself, and legal fees, in addition to the builder’s assignment fee.

Tax Consideration

Do not construe this as tax advice. As a general rule, any gain from assignment transaction is taxable to you. Get your tax advice from an accountant or tax professional.

Important Restrictions

When it is allowed, assigning your condo most certainly comes with some restrictions.

First, the important restriction is that assignment can only be done during interim occupancy period which is between possession date (the date of you getting keys from your builder) and closing date. Not before the possession date.

The most prominent restriction is that you cannot list your condo on MLS. So, without the ability of marketing on MLS or even a simple online or print advertisement, the challenge would be finding a suitable buyer (assignee) for your condo who can close the deal.

Marketing your condo before closing is against the rules and can be considered as a breach of contract and the builder can terminate your contract and forfeit your deposit. So, advertising before closing is a big no-no.

Well, then how do you find a buyer? We have a pool of GTA-wide agents with the database of assignment buyers who may be willing to buy your condo.