Toronto Condo Assignment

Taking over Assignment Sale – Toronto Real Estate: What you need to know about

Wednesday Jan 19th, 2022


Assignment sales are common in real estate transactions.

Often with pre-construction sales, especially in the hot condo market of Toronto and surrounding areas, there's a long time lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. Life stages change, financial and investment are the main reasons why someone would sell a condo assignment.


What's an Assignment Sale?

An assignment sale, or assignment transaction is when the original buyers sell their interest in a property before they take possession of it – in other words, they sell the original agreement, or contract that they have with the Builder to a new purchaser. When the original buyer assigns a property, they are not actually selling the property (because they don't own it yet) – they are selling their promise to purchase the pre-construction condo, along with the rights and obligations of their Agreement of Purchase and Sale contract (APS). The Buyer of an assignment is essentially stepping into the shoes of the original purchaser. 

The original buyer or purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.


How to calculate the total cost when you want to take over the assignment?

When you want to take over an assignment, what are the steps to calculate the total cost?

Knowing the Original Purchase Price of the pre-construction property

First of all, you need to know the original purchase price. As an example in the illustration, the original contract purchase price was $610,990. The Assignor is an overseas purchaser, so he paid 35% of the total purchase price, which was $213,850.

Normally, local buyers need to pay only 20% as initial deposit, but most of the time overseas purchasers pay 35%. So this is the case for this unit, The assignment price is $728,000. The capital gain, which is the difference between $728,000 and $610,990, is $117,010.

Toronto Real Estate Condo Assignment Example


Paying the Deposit + Capital Gain

When taking over the assignment, what the assignee needs to pay the assignor is all the original deposit the assignor paid to the developer plus the capital gain during the whole period, so it should be $213,850 plus $117,010. 

In this example, the assignment will be about $350,000, which will make the assignment challenging for many buyers. So the seller, or assignor, decided to only require the assignee to pay 20% of the total deposit of the original price plus the capital gain as the initial deposit. This amount becomes only $239,208.


The Remainder of the deposit that Assignor Paid

In the assignment contract, it was agreed that the difference of $91,000 will be paid at the final closing. At the final closing, the Assignee often takes a loan from the bank. When the bank discharges the loan or funding, the assignee's lawyer will first pay the amount that the assignee owed to the assignor, before the rest of the loan paid to the developer to finish the final closing cost, closing fees, closing expenses, and register the title.

In our example, the assignee should pay $213,850 to reimburse the deposit the assignor paid. But in our case, we don't require a whole 35%, we only require 20%, which is about 120,000 plus the capital gain altogether only $239,208.

The difference of this 15% deposit will only be required at the final closing when the Assignee gets funding from the bank. So total mortgage, the assignee gets part of them, $91,000 goes to the assignor to reimburse the deposit, and the assignee pays the rest to the developer and finalize closing.


What are the other fees, tax implications and charges?

Ontario Provincial Land Transfer Tax and Toronto Municipal Tax

Like purchasing any other properties in Canada, there is a land transfer tax, and because this unit is in Downtown Toronto, so not only you need to cover the Ontario provincial land transfer tax, you also have to pay for the Toronto municipal tax. So you pay the total amount of $22,070.

To calculate your land transfer taxes, you can go to my website and then look at the menu from Mortgage calculator and calculate your own land transfer tax.

First Time Home Buyer Credit

If you're a first-time buyer, do check on that box on the transfer and the buyer will receive some amount of credit from the government for land transfer tax.

Development Charges

Development charges are what developer charges the buyer as a pass-on fee from the city to connect the service to that building.

Most times in the APS - Agreement of Purchase and Sell, the developer specifies the amount of levies being kept for different size units.

For this 2 bedroom unit, the levy is kept at $12,500. So in the final closing the buyer will need to pay this development charge of $12,500.

Occupancy Fee

In Canada when you purchase a pre-construction condo you have two crucial days, one of them is occypancy day and the other is final closing day. 

The period between occupancy day and final closing day, is called the interim occupancy period. During this period, the developer is essentially charging for the usage of the property to the new owner, in the form of Occupancy fee. In this Toronto condo unit example, the occupancy fee is $1,458.15 each month. Whoever owns this contract needs to pay this occupancy fee. Before the assignment, the assignor pays this Occupancy Fee. After the assignment, the assignee pays this amount to the developer.


HST Housing Rebate

HST for Self Residence

Normally when we purchase a pre-construction condo from the developer, the price already includes HST so you don't need to pay anything if this unit is purchased for your own residence.

HST for Investors

However, if you are an investor, the government no longer gives the rebate to the developer, so the developer has to turn around and ask the investor buyer to compensate them this HST amount, which in this example, is $24,000.

To encourage investors to take this newly built unit to market and create more residential supply, the government can reimburse the HST AFTER the unit is able to obtain a 1-year lease.  The investor can apply for the reimbursement after the lease is obtained, without waiting until the end of the 1 year lease.

Consult with Your Real Estate Lawyer

HST can be charged differently depending on whether the unit is intended for self-residence or investment. In some assignment contracts, even though the assignee is intending for self-residence, they still need to pay the HST at closing to the developer only to get a refund later. So do check with your trusted real estate lawyer to see the specifics in the purchase assignment agreement.

Same thing for the development charge. In a lot of agreement contracts, there's a levy cap which indicates how much you need to pay the development charge at closing. However as an experienced Toronto Realtor, I have encountered many cases where the upper limit is not transferable to the Assignee. So do pay extra attention check with your Real estate lawyer to see if this benefit can be also passed on to you as an Assignee.


Buying and Selling Condo Assignment

in Toronto, Markham, and Greater Toronto Area Real Estate Transaction

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Priscilla Han has been a Realtor since 2017, after working in Consumer Marketing for over 20 years in China for some of the leading consumer goods companies.

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