An assignment sale is a transaction where the original buyer of a pre-construction property transfers their purchase agreement to a new buyer before the building is registered and the deal closes. Rather than selling a completed unit, the original buyer (the 'assignor') is selling the contract itself, and the new buyer (the 'assignee') steps into all the rights and obligations that come with it.
Assignment sales are most common with pre-construction condos in Toronto, where several years can pass between signing the original Agreement of Purchase and Sale and the building's registration date. During that window, the assignor's circumstances may change, or the market may have shifted, creating a reason to exit the contract early.
The process requires the developer's written consent in almost every case. Most pre-construction purchase agreements include a clause outlining whether assignments are permitted and under what conditions. The developer typically charges an assignment fee, which can range from a flat amount of a few thousand dollars to a percentage of the original purchase price. Without the builder's approval, the assignment cannot legally proceed, and attempting one without consent can constitute a breach of contract.
On the financial side, the assignee reimburses the assignor for deposits already paid to the builder, plus any agreed-upon premium above the original purchase price. That premium is where taxes become significant. Since May 2022, all assignment sales of new housing in Ontario are subject to HST on the profit portion, regardless of the assignor's original intent. The deposit itself is generally not subject to HST, provided it is clearly identified in the assignment agreement.
Income tax treatment also matters. Under Canada's residential property flipping rule, effective January 1, 2023, profits from an assignment completed within 365 days of acquiring the purchase rights are deemed business income and fully taxable, not eligible for the capital gains inclusion rate or the principal residence exemption. Even beyond 365 days, the CRA may still classify proceeds as business income depending on the facts. A tax professional should review the numbers before any assignment agreement is signed.
Assignment sales do not appear on TRREB's MLS system the same way resale listings do, and some builders restrict public marketing entirely. The pool of buyers tends to be smaller, and financing can be more complicated because the assignee's mortgage cannot be finalized until the building is registered. Both sides should work with a real estate lawyer experienced in assignment transactions. For a detailed breakdown of expenses the assignee will face once the building registers, see How Much Are Closing Costs When Buying a Home in Toronto?.
