With many new condominium projects in Toronto still under construction and in the pre-registration phases, it is possible that some buyers’ may find themselves contemplating purchasing a unit that is being sold as an Assignment. What does this mean? It means that instead of actually purchasing the unit (as you would for a suite in a building that is completed and registered with the City) you are purchasing the contract that the Seller (who is referred to as the Assignor in this type of transaction) has with the Builder of the condominium.
I have often been approached by clients about Assignments and one of the first pieces of advice that I give them is that they need to realize that professional advice is a must! From the outset, anyone dealing with this type of transaction should consider getting in touch with a Real Estate Lawyer that has experience dealing with these types of transactions.
For those of you that are just at the start of the process and are trying to get a feel for how it goes, I’ve included some basic guidelines of what to expect to happen and what your responsibilities are when you are the purchaser (Assignee) of an Assignment Condominium. Check out the list below, and if you have any questions let me know!
Condominium Assignment Basic Guidelines
Assignor (AKA: Original Buyer)
- Is the original Agreement of Purchase and Sale Assignable?
- Are there any restrictions on marketing the Assignment? (MLS, Exclusive or Privately).
- The Builder may require the Assignor and Assignee to sign the Builder’s consent form or the Builder’s Assignment Agreement. (Note that the Assignee may be required to prove that they can obtain a mortgage).
- The Assignor usually agrees to obtain Builder consent and pay consent fee (may be the Assignee).
- The Assignee may be required to pay the Assignor an amount equal to the deposits (and possibly the interest on the deposits) already paid to the Builder at time of occupancy.
- Provide the Assignee with original Agreement of Purchase and Sale and all related documents.
- The Assignor is not usually released from their obligation to the Builder if the Assignee does not complete the purchase.
- The Assignor is responsible for the following costs: Legal fees and disbursements, builder consent fees, real estate commission.
Assignee (AKA: The person buying the unit from the Original Buyer of the property)
- Enter into an Assignment Agreement.
- Obtain original Agreement of Purchase and Sale and related documents. Review obligations carefully and have a lawyer review.
- The Assignee may pay final deposit on occupancy.
- The Assignee may pay Occupancy fees at time of occupancy these include; estimated property taxes, estimated common expenses, and interest on purchase price.
- The Assignee usually delivers 6-12 post-dated cheques to the Builder.
- The Assignee may pay the following to the Builder on final closing; (note that these costs are typically NOT financed with a mortgage)
- Estimated property taxes for up to 2 years
- Hydro/water/gas meter installation and connection charges
- Development charges/levies
- Tarion New Home Warranty (see Tarion website for fee structure)
- Discharge of builder’s mortgages
- Builder’s lawyer’s Law Society charge
- Compensation for the Builder-cost of handling the Assignor’s deposit cheques
- 2 months of occupancy fees for reserve fund
- Other amounts set out in the Agreement of Purchase and Sale
- The Assignee is responsible for the following additional fees:
- Legal fees and disbursements
- Land Transfer tax (provincial and municipal)
- GST/HST rebate
- Municipal levies
- Assignee takes occupancy of unit and all applicable financial obligations.
- After the condominium is registered, on final closing the Builder transfers title to Assignee. The Assignee pays the balance to the Builder. The Assignee may also pay any amount still owed to the Assignor depending on the terms of the Assignment.