Because the project has not yet been officially registered, homes and condominium units that are sold pre-construction cannot technically be “sold” prior to completion. Rather, what can be sold is the purchase contract of a unit to a future buyer. This is called an assignment. Not all contracts for pre-construction units provide the right of assignment-this right may be an incentive the builder/developer gives as part of a unit’s Platinum sales status, or it may have a fee should it be exercised. To ensure you have this right, a clause in the purchase agreement-known as the “right to assignment”-allows the contract to be transferred before registration.
Once a new building or community is registered with the city in which it is located, ownership of individual units is transferred to their respective buyers. Until that registration is complete, however, the only claim that buyers have to their unit is the right to take ownership at time of registration.
This process of buying and selling assignments involves three parties: the original purchaser (the assignor), the new purchaser (the assignee) and the developer. The typical process is as follows:
- The assignor and assignee will work out a purchase price (likely including the sum of the assignor’s down payment and any agreed-upon additional amount) that is due within a negotiated timeframe.
- The assignee will be granted the right to interim occupancy, and will go through the process of interim & final closing (both of which are discussed in greater detail here and here)
- Upon registration of the building, the assignee now has full rights as owner.
Benefits of Buying an Assignment
In the Toronto real estate market, assignment sales offer some of the best deals available-with prime resale units often leading to bidding wars. In short, assignment sales can offer better deals and less competition than the resale market.
For more info, visit the CRA’s webpage regarding assignments.