Guide to Assignment of Agreement of Purchase and Sale
- Understanding the Key Provision of the new APS
-The APS and disclosure package (statement of disclosure, draft declaration,
bylaws, rules and budget)
-Related documents, as applicable: amendments, extra/upgrade schedules, Tarion certificate and PDI report, interim occupancy
statement of adjustments etc.
-Schedule of Deposits
-Occupancy Date versus Unit Transfer Date (ownership transfer)
-Builder’s adjustments ($)
-H.S.T and H.S.T rebate
-Prohibitions/Restrictions on Assignments
Assignment and Assumption -Assignor assigns its interest and rights in the Original Agreement with the original seller and its interest
in the original “deposit”. Assignee “assumes” and agrees to perform all of the Assignor’s obligations under the Original Agreement
The vast majority of a new condo or house contracts do not allow for the assignment of an Agreement of Purchase and Sale, without the
express written consent of the Vendor/Builder. Moreover, they generally provide that if the buyer in any way tries to sell, assign or list
(on the MLS system) the property, the buyer is in breach of the Agreement of Purchase and Sale.
- Receiving Consent from the Builder
If the original buyer has the right to assign the agreement under the terms of the contract, he should find out what the Builder’s
requirements for doing so are. There are often specific requirements, fees and forms which must be completed if the Builder is going to
consent to an assignment. It may still be possible to obtain consent to an assignment even though the contract does not include a clause
entitling the original buyer to make an assignment.
- Continuing Liability after Assignment
Even though the original buyer has essentially transferred his or her right to buy the property to the new buyer, the original buyer is
not fully of the hook. The original buyer’s (assingor’s) continuing liability under the Assignment Agreement can be a major
consideration in these types of Assignments.
- What is the Purchase price and does it recapture the Assignor’s costs?
The amount to be paid to the Assignor ususally equals price paid to the Assignor minus the original purhcase price plus the deposits paid by the Assignor to the Builder.
NOTE: The Assignor’s “profit” may be subject to HST and income taxes
- Questions to Ask?
-Who will pay the assignment fee and legal fees charged by the builder for providing its consent?
-Does it include any deposits paid by the original buyer to the builder, after the agreement was signed? Does it include any interest on deposit?
-Does it clearly state the new buyer will take over the entire contract, including the adjustments that are to be paid to the the buider on closing? Or are those adjustments to be split between the assignor and assignee?
-Does the price include money paid by the original buyer for extras and upgrades?
-Are there any additional deposits that are still owing to the buider, under the original agreement? Does the new buyer agree to take on responsibility under the original agreement for making additional deposit payments until the final closing date?
-Does the new buyer have a full understanding of the amount of all the adjustments that must be paid to the Builder pursuant to the Original Agreement?
- When will completion date for the assignment occur?
This date will be negotiated at the time of contracting. Generally there are three possible scenarios:
(a) On a specific date agreed to by the parties
(b) on the occupancy date
(c) on the unit transfer date
- HST and HST New Housing Rebate
How should HST on the transaction be calculated? Because the new buyer’s price will inevitably be higher than the
original buyer agreed to pay to the builder, there is an important issue as to whether the difference-meaning the
original buyer’s profit-should be subject to HST (and if so, who will pay in the transaction)
This determiantion hinges on whether the assignment is a ‘taxable supply’ under the tax legislation and on whether
the original buyer can be considered or deemed a so-called ‘builder’ of the home for HST purposes. This, in turn,
involves a number of complex legal concepts and factual findings- including the intention of the original buyer as to
whether the home is going to be a primary residence.
The transaction should be conditional on financing as in the normal course. However, you should ensure that the
financing is arranged on the new assignment purchase price.
The Assignment Agreement must be made conditional upon review and approval by each of the assignor’s and