Assigning an Agreement of Purchase and Sale in Ontario

Assigning an Agreement of Purchase and Sale means the original buyer — called the assignor — transfers their rights and obligations under the contract to a new buyer, called the assignee, before the original closing date arrives. Rather than the original buyer completing the purchase and then reselling the property afterward, the assignee effectively steps into the original buyer’s shoes and becomes the one who completes the purchase directly with the seller.

This differs from a typical resale transaction in an important way: in a resale, the seller already owns the property and is transferring title to a buyer. In an assignment, the property has often not even been built or transferred yet — the assignor is transferring their contractual right to eventually buy it, not the property itself.

There are generally two closings involved in a completed assignment. First, the assignment itself closes between the assignor and assignee, where the assignee pays the assignor for stepping into their position. Later, the original closing between the assignee and the builder or seller takes place as scheduled, completing the purchase that was originally agreed to. Lawyers for the assignor and assignee are typically involved in documenting the assignment agreement itself, separately from the lawyers handling the eventual closing with the builder or seller, since the two transactions involve different parties and terms even though they are closely connected.

Assignments can happen with any type of Agreement of Purchase and Sale, but they come up most often — and raise the most questions — in connection with pre-construction and new-home builder contracts, where the gap between signing and closing can stretch for years.

It is worth being precise about terminology here, since “assignment” is sometimes used loosely in everyday conversation to describe any sale of a not-yet-built property. In the legal sense used throughout this article, an assignment specifically refers to transferring the contractual position under an existing APS to someone else, rather than any other way of dealing with a pre-construction purchase.

Pre-construction condominium purchases are a common setting for assignments because of the long timelines involved. A buyer might sign an agreement for a unit that will not be ready for occupancy for several years. During that gap, circumstances can change in all sorts of ways — a buyer’s financial situation, family plans, or investment goals may shift well before the building is ever finished.

Rather than waiting out the full timeline and completing a purchase that no longer fits their plans, some buyers choose to assign their agreement to a new buyer and exit the deal early, sometimes realizing a gain if the unit’s value has increased since the original agreement was signed. Others may simply want out of the deal regardless of price movement, for personal or financial reasons unrelated to the property’s value.

Market conditions also shape how common assignments become at any given time. In a rising market, assignment listings can attract considerable interest from buyers hoping to acquire a unit below current resale prices while it is still under construction. In a flat or declining market, assignors can find themselves selling for less than they originally agreed to pay, which is its own source of financial risk worth understanding before signing a pre-construction agreement in the first place.

Most agreements — and virtually all standard new-construction and pre-construction builder agreements — include a clause requiring the seller’s or builder’s written consent before an assignment can take place. This consent requirement exists partly so the builder retains some control over who ultimately takes title and partly so the builder can manage its own marketing and sales process for the building.

Because consent is so often required, a buyer considering an assignment generally needs to start that process with the builder or seller well before trying to find a new buyer, rather than assuming consent will simply be granted once a buyer is found.

Some builders also restrict how an assignment can be marketed, for example by prohibiting a unit from being listed publicly on real estate listing platforms until consent is granted, and by requiring any advertising to go through the builder’s own sales office. These restrictions are worth checking early, since they can affect how quickly an assignor is realistically able to find a buyer.

Builders commonly charge an assignment fee as a condition of granting their consent. This fee is separate from the purchase price itself and compensates the builder, at least in part, for administering the change and in some cases for restrictions on how the unit was originally allowed to be marketed.

The fee is typically paid by the assignor out of the proceeds they receive from the assignee, though the specific allocation can be negotiated as part of the assignment agreement between the assignor and assignee. Assignment fees, along with any real estate commission and legal costs on both sides, should generally be factored into whether an assignment makes financial sense for the original buyer.

Some builders set their assignment fee as a flat amount, while others calculate it as a percentage of either the original purchase price or the profit realized on the assignment. Because this can meaningfully affect what an assignor actually nets from the transaction, it is generally worth confirming the builder’s fee structure before agreeing to an assignment price with a prospective assignee.

Assigning a purchase agreement can trigger both income tax and HST considerations, and this is an area where the rules are genuinely complex and have been the subject of legislative changes in recent years. Whether a gain on assignment is taxed as income or as a capital gain, and whether HST applies to the assignment price, depends on factors specific to the transaction and the parties involved.

This article flags these issues generally — it is not tax advice, and anyone considering assigning or purchasing through an assignment should speak with a qualified accountant or tax professional about their specific circumstances before proceeding. Disclosure of the original agreement’s terms to the assignee is also an important part of a properly structured assignment, since the assignee needs to understand exactly what they are stepping into.

Beyond the tax and consent issues already discussed, an assignment introduces a layered structure — the original APS between the assignor and the seller, and a separate assignment agreement between the assignor and the assignee — that can create its own disputes if not carefully drafted. Whether the assignor remains on the hook if the assignee later fails to close is a question that depends entirely on the specific wording used in both agreements.

For a broader look at what happens when any party — original or assigned — fails to complete a purchase, see our guide to what happens if a buyer or seller fails to close. You can also review our general guide to the Agreement of Purchase and Sale in Ontario for background on how the underlying contract works. This article is general information about how assignments typically work in Ontario, not legal or tax advice about a specific transaction.