Assignments for pre-construction condo

You've might have noticed in some builders provide free assignments and others charge a fee.  A lot of first time buyers and first time investors might not understand how this affects their purchase. Let me try to explain what it is and how this can affect your decision to purchase.

Assignment is the ability of a purchaser to sell their rights to an existing contract (in this case, between the purchaser and the builder) to a 3rd party (new buyer) without forfeiting the agreements of that contract before the final closing.

Now you might be thinking, isn't this just selling the condo you already bought?  Not quite. A purchased pre-construction condo is owned by the builder until the building is registered as a condo corporation with the city. You cannot sell what you do not own.  At this point, the only thing you own is the rights to the contract that says you and the builder has an agreement in place. 

So between the day you sign the contract and leave your deposit cheques, to your colour selection day, to your pre-delivery inspection, to occupancy (when you get your keys to the unit), and the day before final closing, purchasers cannot do a standard real estate sale of their unit.  This is where an assignment comes in. 

So what's exactly involved?  First, you have to find a new buyer.  You and the new buyer have to agree on a new purchase price (this does not have to match the original purchase price).  You then take this contract to the builder to request an assignment.  Once the builder approves the request, appropriate paperwork will be executed and this is where the assignment fees come into play. 

Keep in mind that the assignment fee does not include your own (or the new buyer's) lawyer cost to make sure your interest is protected through out this transaction.  It does not include the finding a buyer, negotiation, drafting assignment contract either by a Realtor or a lawyer. 

Assignment clauses are not always part of your contract.  Without this clause in your contract, you do not even have the option to sell your rights.  This means you have to wait until final closing before you can put your unit up for sale.  If you are interested in having this option, make sure you request the assignment clause be added to your contract within your 10 day cooling period.  Better yet, request for the clauses to be added to your contract before you sign the paperwork.  Make sure your lawyer reviews the contract during the 10 day cooling period and verifies the conditions for the assignment (including waiving the builder's fee to do an assignment).  Each builder will have different assignment clauses from different price to when is the earliest time you can do an assignment (when the roof is up, when the building is 90% sold, etc.). 

Feel free to contact me if you have more questions.