What is an assignment sale?
This is basically the sale of pre-construction Toronto condos for sale. So, rather than selling a unit that is already constructed, a contract is provided. This right or contract is for acquiring the property once it is completed. The original purchaser or assignor of Toronto condos basically sells their obligation, which is as per the original contract. This is sold to the assignee or a new purchaser.
All the duties and obligations of the assignor of Toronto condos will go to the assignee. These duties include taxes, payments, and maintenance fees, which is basically for the interim occupancy. Once the construction has been completed, the assignee will get the title for the real property and will have to bear all the final costs for Toronto condos for sale.
Is an assignment considered legal?
Until and unless it is mentioned in the documents, the assignment is legally permitted. So, the assignee must go through the original documents thoroughly. There might be a case in which the developer of Toronto condos will change the assignor some amount for this sale.
Why would anyone want to sell their condo unit on the assignment?
The sales of most pre-construction Toronto condos are held years before the building is completed. This leaves a long time between purchasing a unit and then actually living in it. A lot can change during this period of life. The buyer might shift to a new city, or there might be changes in the family or any other reason. So, if a particular property was as per the buyer's requirements a few years ago, that might not be the case once the construction is done.
A person might also sell their suite due to financial reasons. Maybe the buyer isn't able to close on the condo anymore. Or simply, it could be an investor as well who got a pre-construction condo just with the intention of making a sale for a profit later.
Due to all these reasons, the buyer of Toronto condos might be interested in making an assignment sale for the condominium.
Can any real estate transaction which involves a purchase agreement be assigned?
In normal cases, yes, any purchase agreement can be assigned until and unless it is prohibited in the agreement of Toronto condos for sale.
Is it necessary for the assignor to get permission from the developer to assign the contract?
This must be mentioned in the purchase agreement, and you will have to consult the same. In the majority of the cases, an agreement sale will not be permitted with the consent of the developer. Therefore, make sure that you consult them along with a legal representative. In case of an unauthorized assignment sale, there are chances that the agreement might be terminated. If this happens, the deposit will be withheld.
Will the assignor or assignee require lawyer service?
Yes, it is recommended that both the assignee and assignor of the Toronto condos get a lawyer who has real estate as his area of expertise.
Is there any standard legal form for assignments?
Yes, there are a couple of forms. OREA Form 145 Assignment of Agreement of Purchase and Sale (including applicable schedules and OREA Form 150 Assignment of Agreement of Purchase and Sale are the two forms that are necessary. In the majority of the cases and sales, expect the developer to have a form of their own as well.
Is it possible for the Realtor of the Assignor to market on the MLS?
It mostly depends on the developer. So, make sure you check with the company as it might be against the advertising permits.
What happens in case the assignee doesn't close?
It is not different than the property sales in that regard. So, the assignor will not be released for the obligations as per the original purchase agreement. Whenever such a situation arises, both the assignor and assignee will be held liable.
What if the occupancy, construction, unit transfer, or occupancy date is delayed?
Even if there is a delay in any process, the agreement will still hold true. Therefore, the assignee of Toronto condos has agreed to the agreement along with the responsibilities that come along with it. This will also include the delay in occupancy or construction.
What is the basic cost of assigning an Agreement of Purchase and Sale?
In case the developer has agreed to the agreement, there will be legal, and administration fees included. The fees will vary from assignment to assignment. So, make sure that you check it out in the purchase agreement itself. You can also consult the developer for Toronto condos for sale for specific information.
In case there is an interest on the original deposit payable by the builder, who gets it?
Until and unless it is mentioned otherwise in the agreement, the interest will be paid to the assignor.
When will the assignor get the money?
The payment part will depend on the terms of the agreement and the closing date. As per most agreements, the assignor gets paid when:
- The assignee gets the legal title
- The assignee takes possession of the real estate
- The builder approves the process
Who is responsible for paying the interim occupancy costs?
As soon as the assignment is finalized, the assignee will be the one responsible for paying the occupancy costs.
What are the different closing fees that are payable?
The ownership title for the real estate unit is transferred to the assignee as soon as the condo is registered. Therefore, if there is any balance to the assignor, the assignee will have to pay for that. Also, the remaining amount of Toronto condos has to be given to the builder by the assignee.
Here are some of the costs that the assignor might have to pay.
- Builder’s lawyer’s Law Society charges - $70 approx.
- The estimated taxes on the property for up to 2 years.
- Development charges or levies which can go to thousands of dollars.
- Water/hydro/gas meter installation charges and charges for connection – approx. $500 - $700 per meter.
- Discharge of builder’s mortgages - approx. $200-$300 per mortgage
- Tarion New Home Warranty – ranges from $600 - $ 1,900
- A couple of months of occupancy fees which will be taken as a reserve fund.
- Other costs as per the agreement.
These costs are usually not financed along with a mortgage. So, the assignee will be responsible for paying the additional fees which can include:
- Municipal levies
- Land transfer tax (both municipal and provincial)
- Legal fees and disbursements
- GST/HST rebate
What could be the reasons behind someone wanting to assign their condominium?
When it comes to pre-construction condominiums, the time lag between the signing of the buying contract and getting possession and moving in is quite long. In fact, the final closing period is also long. Therefore, it is not a surprising thing if a Buyer's circumstances or lifestyle changes.
This could happen due to a variety of reasons like moving to a new place, finding a better neighborhood for a property, getting married, etc. amongst other things.
Another one of the major reasons is the financial aspect. The owner of the Toronto condos might not have sufficient funds to complete the entire financing of the condominium and, thus, wishes to end it from his side and sell it off as an assignment instead.
Also, there are quite a lot of investors in Toronto who plan on buying pre-construction real estate but don't have plans to wait till the final closing. In such scenarios, the investors keep an eye out for maximum profits and sell their pre-construction condos as assignments beforehand. These are the primary reasons for assigning their condominiums. There could be some other rare reasons for it as well.
What all negotiations can one make in an assignment sale?
It is important to note that the assignee will be taking over the contract of the original purchaser itself. Therefore, they can't really do any negotiation for the price mentioned in the contract. They will have to simply take over the contract from the builder and settle for the already existing sale price of the property on contract.
In majorly all the cases, the assignee just has to mirror the entire deposit that the owner has made to the builder.
The main aim of the property owner is to make some gains. Therefore, one of the key things in an assignment sale is the negotiation and agreement on a price.
Are there any tax implications of an assignment for sale?
The best thing to do to understand this properly is to get in touch with a certified accountant and understand this in-depth as per your assignment.
To give you a general idea, any gains that you make from the assignment sale of Toronto condos is taxable in nature. Also, any of the losses pertaining to the assignment can be written off.
It is the responsibility of the assignee or the new buyer of the property to pay all the land transfer taxes as well as any HST that might be due during or after the sale.
How does the assignment closing actually work?
When the concern is about assignment sales, there are majorly two main types of closings that are there. These include the one between Assignor and Assignee. And, the other one includes closing that takes place between the assignee and the builder.
In the first case, the buyer of the assignment receives the deposit plus the additional profit (if any), or the deposit minus the losses in some cases. This is paid by the assignor.
In the second case, the assignee is responsible for paying the leftover amount to the builder of the assignment. In most cases, this is possible only with the help of a mortgage. Also, the assignee of Toronto condos is responsible for paying the due land transfer taxes for the assignment.
There is a third scenario that can exist in closing. In this one, the buyer gets the main possession of the real estate, but it is not exactly having the ownership for it. This period is generally referred to as the interim occupancy period. This case happens when the property is fully built but is not registered yet. This period can vary from a couple of months to even years.
Can assignments only be pre-construction condos?
No, this is not always the case. One can assign any type of real estate property and not necessarily a pre-construction condo only. The only condition is that there should not be any restrictions regarding assigning the property mentioned in the contract of the property.
The owner or buyer of Toronto condos has the right to make any kind of home an assignment considering that they haven’t taken possession of it yet.
What is the pricing for assigning a pre-construction condo?
Apart from the usual Builder fees for the assignment, there is a real estate commission involved as well that you will have to pay. Along with that, you will have to pay the legal fees as well.
An assignment's sale is considered to be a more complex sale. Therefore, there are chances that you'll have to pay a legal fee that is higher in cost when we compare with a resale property.
What is a better choice: Assignments or resale?
Quite often, there is a debate on whether an owner should opt for assigning a condominium that they bought. Or, these owners should wait instead for the building or project to first register and then rather go for reselling it as a usual condo.
Pros of Assigning rather than waiting?
- You can get your deposit amount early, and thus, locking in profit becomes early.
- No need to pay any kind of land transfer taxes.
- Exemption from paying HST.
- It suits the lifestyle better.
- Making the maximum possible profit on the returns. This is especially true in case the property rates are already on a decline and will continue with the downfall.
Some cons of assigning rather than waiting
- There is a comparatively lesser number of buyers available for assignment sales. There are more buyers available for the resale option. This results in a decline in property pricing due to waiting for the right buyer.
- Assignment sales generally have a lesser value than the resale price.
- There are quite a few marketing restrictions on the assignment sale.
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