Pre-construction purchases are a hot item. Buyers get early bird prices. Builders get needed capital.
What happens if a buyer changes their mind? The unit may no longer be right for them. They could be transferred or can’t get financing. Speculators often buy pre-sale units and flip them if the market goes up. That can work to your benefit, provided the deal is right.
Buyers who sell their pre-construction interest before occupancy “assign” their unit. They are referred to as the “assignor”. The new purchaser is the assignee. What the purchaser buys is a promise to purchase the unit when it is done.
Just So You Know
- Contract terms are non-negotiable. The assignee inherits the agreement of purchase and sale as is.
- Because the building is not yet complete, the assignee has no resale units to gauge what the unit is worth.
- The assignee’s deal is with the assignor, not builder.
- The assignee’s deposit is usually the same as the assignor’s.
- The price that the assignee pays for the unit may be higher than what the assignor paid so that the assignor can make a profit. It’s also possible that the assignee pays less than the price paid by the assignor as assignments tend to be harder to sell or the assignor may be motivated to sell.
- The assignor may owe the builder an assignment fee. This could be included in the assignment price.
- The assignee pays the land transfer taxes and HST.
- The builder may have to approve the assignment.
Your Real Estate Lawyer’s Role
When you buy an assignment property, your real estate lawyer deals with both the assignor and builder. Your lawyer pays the assignor their deposit back, plus or minus any profit or loss they made by selling their contract to you. Your lawyer then pays the builder the remaining amount you owe for the unit. Your lawyer will also coordinate receiving funds from your lender, if applicable and arrange to pay the land transfer taxes.
Occupying Your Unit
Once your unit is complete, you can move in. If the unit is not yet registered with the municipality where it is located, your occupancy is considered interim. Until the registration is complete, you will pay the builder a monthly amount, which is designed to cover at a minimum strata fees (if any) and property taxes. When the unit is ready to be registered, you will take “permanent possession” of the unit and the builder is paid the full purchase price as outlined in your Agreement of Purchase and sale.