Assignment sales have become increasingly popular in copyright's real estate market, particularly in areas with significant pre-construction development. An assignment sale occurs when a buyer of a pre-construction property sells their rights to the property before it is completed and transferred into their name. This allows the original buyer, known as the "assignor," to pass on their purchase agreement to a new buyer, the "assignee," often before the property is even built.
How Assignment Sales Work
In a typical assignment sale, the assignor initially purchases a property directly from the developer, often paying a deposit and entering into a contract for the property. Due to factors such as rising market prices or personal circumstances, the assignor may decide to sell their rights to the property before the developer finishes construction or hands over possession.
When assigning the contract, the assignor sells the right to take ownership of the property upon completion. The assignee, or the new buyer, takes over the original contract's terms, including price, closing dates, and any other conditions. The assignee is generally required to pay the assignor a premium or additional amount above the original price if the property has appreciated in value.
Taxes and Legal Considerations
Assignment sales have tax implications that both assignors and assignees should be aware of. In most cases, assignors are required to pay capital gains tax on the profit from the sale, as well as HST (Harmonized Sales Tax) on the assignment fee. Assignees may also be responsible for paying taxes on the purchase, depending on the province and specific transaction details.
Conclusion
Assignment sales offer flexibility and potential profit for both sellers and buyers, but they come with inherent risks and legal complexities. It is essential for all parties involved to consult with real estate professionals and legal experts to navigate the process smoothly and ensure compliance with applicable laws. As copyright's real estate market continues to grow, assignment sales will likely remain a prevalent option for buyers and investors alike.