The benefit to Assignments of “Agreement of Purchase and Sale” is when you would like to realize your original investment and profit ahead of time. You will not have to incur all closing costs associated with the unit when it is due for registration. You do not need to take out a Mortgage. Some builders restrict renting out the unit prior to registration. Limiting your options. This will increasing your overall cost of the unit and reducing your profit.
You must ensure that the Agreement of Purchase and Sale signed with developer does not restrict the resale of the unit prior to registration. If it does restrict the resale of the unit, there are still ways around it, however your REALTOR or lawyer will have to negotiate for your with the builder, on a per project or case basis.
Most “Agreement of Purchase and Sale” will have a provision to allow a buyer to assign their agreement, subject of course to an assignment fee and legal fees payable to the Builder Assignments of “Agreement of Purchase and Sale” are quite common; but not all agreement allow assignments, buyers must review the “Agreement of Purchase and Sale” with an experienced REALTOR and lawyer who will know how to protect your interests.
The assignment provision will generally be subject to the Builder’s consent which may be arbitrarily withheld. The Builders may want to satisfy themselves that the Assignee can obtain financing before allowing the assignment.
Typically an Assignor will not have to pay any of the closing adjustments, land transfer tax and or have to pay the last deposit or down payment as these costs will be assumed by the Assignee on closing. The next important thing to know is the costs involved in assigning. Builders typically charge the Assignor (seller) an assignment approval fee based on a percentage of the original purchase price (before taxes). Usually 1% of original price. in order to give consent to the Assignments.
The builder is not concerned with the new arrangement of payment or price between you and the new buyer. However the terms and conditions of the original agreement must remain in effect with the developer. Should the new buyer default on the terms and conditions of the contract with the builder you as the original buyer are still liable.
When parties are entering into an assignment deal, the first step is the assignment agreement between Assignor and Assignee. Assignments may sound complicated because there are three (3) parties involved, the Assignee, the Assignor, and the Builder, compared to two (2) on a standard transaction. However, assignments are not complicated if they are properly explained and executed.
The Seller shall enter into a written agreement with the new buyer. This contract is extensive and can either be prepared by an experienced REALTOR or lawyer. This agreement should always be conditional on most of the following conditions: The Assignee’s lawyer review of the assignment agreement as well as review of the Builder’s assignment agreement between all the parties, review of the original agreement of purchase and sale with all the schedules and amendments and if interim occupancy has occurred, review of the interim statement of adjustments.
The second step is entering into the Builder’s assignment agreement which could still hold both Assignee and Assignor liable for final closing. The last step is the final closing whereby the Assignees would need to close the transaction with both the Builder and Assignor if monies are still payable to the Assignor under the assignment agreement.
Copy of the original agreement entered into with the builder, shall be Attached as schedule to this contract with condo declaration documents, PDI booklet, letters from the developer’s lawyer acknowledging payment and any other notification that may have been received. (List of upgrades, deficiencies list noted at the time of PDI, etc.)
Usually when assigning a contract you the Seller expect to receive the original down payment and any profit that may have been realized as a difference between the original purchase price and what it is being sold for.
Builders have the right to refuse consent to the assignment and/or charge a premium should the property have been advertised on the MLS or newspapers etc. for sale prior to registration.
To protect the interests of The seller, should insure that the buyer needs to make all payments (original down payment + profit) to the seller’s lawyer in trust. This amount is to be released to the seller upon successful consent from the builder or as provided for in the contract.
Typical Closing Costs: Legal Fees. Depending on the lawyer, they are usually around $1,500 including disbursements. These deals are more complex than resales and involve three parties (Assignor/Assignee/Builder) and their respective lawyers in a two-stage process (Interim Occupancy and then Final Closing). and Realty Fees. The Assignor (seller) usuallly pays these fees plus HST.