Investing · 6 min read
Assignment sales: how to buy or sell a pre-construction contract
What an assignment sale is, when assignments are allowed, builder consent and fees, HST and tax treatment, and the risks for buyers and sellers in Ontario.
What is an assignment?
An assignment sale is the sale of a pre-construction contract before the home closes. The original purchaser (assignor) sells their rights and obligations under the Agreement of Purchase and Sale to a new buyer (assignee). You are not buying the home itself — you are buying the contract to buy the home.
Builder consent and fees
Almost every builder agreement restricts assignments. You typically need the builder's written consent, an assignment fee (anywhere from $0 on a negotiated agreement to $5,000–$15,000), and you usually cannot advertise the assignment on MLS without permission. Negotiating the right to assign — and a reduced fee — during the 10-day cooling-off period is standard practice for investors.
Tax treatment changed — know the rules
Since May 2022, HST applies to all assignment sales of new homes in Canada — the assignor charges HST on their profit and deposit recovery. Assignment profits are also generally taxed as business income (fully taxable), not capital gains, and the federal anti-flipping rule treats profits on homes held under 12 months as business income. Get tax advice before assigning.
Risks for the assignee
As an assignee you inherit the original contract exactly as written — including uncapped development charges or unfavourable terms. You'll typically reimburse the assignor's deposits plus pay their profit up front, and your mortgage financing is based on the original purchase price, not what you paid. Have a lawyer who handles assignments review everything before you commit.
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