1. What is an assignment?
2. Why assign?
3. What are the occupancy costs?
4. What are the closing costs?
5. Do They have to pay the GST?
6. What is the cost for the assignment?
7. Should I request consent from the developer?
8. When do they get their money?
9. How much would they get?
10. What if the Buyer/Assignee doesn't close?
11. How soon should we be listing?
12. Can we market on the MLS?
13. What closing fees are payable?
14. Should I be referring to the Developer's recommended agent?
15. What if the development is delayed?
16. Who pays the Interim Occupancy Costs?
17. How much should they sell for?
18. Do I need the permission of the developer?
19. Do they have to claim the Capital Gains?
20. What is the Interim Closing?
21. What is a Final Closing?
22. What amount of commission will I get?
23. Can I sell it myself?
24. Why shouldn't we just wait until final closing?
25. Is it Legal and Binding?
1. What is an assignment?
An Assignment is a legal sales transaction whereby the Original Purchaser
(the "Assignor") of a property sells, and thereby transfers, their interest and
obligations under the original contract to a new Purchaser (the "Assignee"). This
assignment usually takes place during interim occupancy. The "Assignee" will assume
all of the "Assignor's" duties and obligations under the original Purchase & Sale
Agreement. These rights and obligations are stated in the original Purchase & Sale
Agreement and include terms such as payments of mortgage, taxes and maintenance
fees during interim occupancy. Upon Completion, the "Assignee" is granted the Title
to the real property and will incur all final closing costs.
An Assignment is legally permitted unless otherwise expressed in writing. An Assignment
fee may be charged by the Developer and is normally a cost borne by the "Assignor"
(the Original Purchaser).
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2. Why assign?
Your client should assign if they have decided not to wait until the final
closing to get their money, or they do not wish to pay the monthly carrying cost
(interim occupancy) and final closing costs, or they feel that by selling now it
would be a good decision based on future market conditions.
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3. What are the occupancy costs?
During the interim occupancy, and, according to the condominium act your
client would be responsible for the monthly payments of:
interim occupancy fees (keep in mind that the interim occupancy could last
up to 2 years and that most will register the building before 9 months)
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4. What are the closing costs?
The closing costs will vary
and to get a detailed statement of adjustments they should ask their lawyer. This
is the response most developers agents will tell them, it's a great way to get rid
of them, if they call the builder's lawyer they will react by saying, "We act on
behalf of the developer, you would have to check with your own lawyer." in most
cases their lawyers response would be "I don't have the adjustments from the builders
lawyer yet. If they need to speak with the city or government, well, don't even
get me started.
The major expenses would be the
GST, Education Levies, Development
charges, provincial land transfer
tax and city land
transfer tax, which can add up to over $10,000. The developer
has more than likely added many more costs that they are not aware of and that they
will find impossible to find out until the moment comes whereby they are sitting
in front of their lawyer and it is the final closing day. They should budget for
$10,000 to $18,000. Depending on if they are a first time buyer and if this will
be their primary residence.
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5. Do they have to pay the GST?
If this is not their primary residence then yes, they will have to pay a
portion of the GST on the purchase price of their unit.
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6. What is the cost for the assignment?
In most cases the developer will consent to an assignment providing that
the assignor or assignee agrees to pay an administrative fee ($3,000 - $5,000 on
average). This may already be written into your agreement.
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7. Should I request consent from the developer?
If you go in and ask for assignment rights now, the developer will probably
say no in that there is nothing in it for them and they don't wish to have all their
past purchasers selling and marketing and advertising units that are still legally
belonging to the developer. Let us do our job, we will find the buyer without advertising
or marketing or placing the unit on the MLS or causing any disturbance, we will
help to negotiate with the developer once there is a bonafide sale pending, using
words that they will understand.
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8. When do they get their money?
In an assignment, depending on the closing date that assignor & assignee
agreed on, ideally they would have the vendor's balance cheque issued to them a
few days after the assignment closing date.
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9. How much would they get?
The assignment price - the original purchase price - all costs incurred until
closing the assignment.
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10. What if the buyer/assignee doesn't close?
Assignor would be ultimately responsible for the closing, however they should
be able to keep the deposits and claim further damages against the assignee
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11. How soon should we be posting?
You should post the unit immediately! It's like fishing, you can bait the
hook but until you drop your line in the water you will never get a bite.
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12. Can we market on the MLS?
No! They do not legally own this property, the developer will likely charge
a tall penalty and they may even attempt to keep the unit and force them to forfeit
the deposits. Agreements strictly prohibit you from listing on the MLS. Also, the
real estate board does not recognize the buyer as an owner until the title has changed.
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13. What closing fees are payable?
Once they have assigned their unit there is only a nominal legal fee which
includes consultation and execution of the undertaking to get the balance of funds
owed to them. Also the assignment fee to the developer and the real estate commission.
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14. Should I be referring to the Developer's recommended
agent?
This poses a conflict of interest, who are they really representing? The
developer's primary goal is to sell remaining inventory, you should refer the business
to an Assignment Professional.
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15. What if the development is delayed?
It probably will be. They must be patient if balance funds are owed to them
and realize that the assignee has agreed to take on their agreement and all responsibilities
involved in it.
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16. Who pays the Interim Occupancy Costs?
Once assignment is closed, the assignee will pay through to the final closing
and will pay the final closing costs unless specifically negotiated otherwise.
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17. How much should they sell for?
Determine the selling price the developer is now asking and reduce price
accordingly to make it more attractive. Remember, it is much easier for the purchaser
to buy direct from the developer, they feel that they are making a much safer transaction
rather than dealing with a 3rd party.
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18. Do I need the permission of the developer?
Yes, however, if the developer does not cooperate with the assignment you
should entertain other methods of closing the transaction, usually involving later
closing dates. it is important to request consent only after you have a buyer and
to use AssignIt.ca so as not to interfere with the developer's advertising campaign.
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19. Do they have to claim the Capital Gains?
They should speak with an accountant. Any Accountant will say that you should
pay taxes on any and all gains to protect their interest. It seems to be on the
honour system in that the unit never registers in their name.
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20. What is the Interim Closing?
The Interim Closing is the date the Developer hands over the keys and allows
the purchase to take occupancy even though the building is not yet registered with
the City. During the interim occupancy, and, according to the condominium act the
purchaser would be responsible for the monthly payments of:
interim occupancy fees.
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21. What is a Final Closing?
Final Closing refers to the date soon after the building is registered as
a Condominium Corporation with the City. On this date, the purchaser pays the balance
owing under the agreement of purchase and sale and arranges their own mortgage to
be funded.
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22. What amount of commission will I get?
Providing you give us all the required details of the original purchaser
including their offer, you will receive a referral of 25% of the listing portion.
If you list it direct and negotiate all aspects of the assignment process, your
commissions are yours 100%. If you become an Assignment Professional with AssignIt.ca,
you will be given referrals. We keep the standard 25% referral commissions applicable.
This works in the case of buyers/assignees and seller/assignors.
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23. Can I sell it myself?
Yes, providing that you have taken the time to learn the assignment process.
Remember that if you list, sell, rent, transfer interest etc. without the expressed
written consent of the developer, you could be placing your client into a situation
whereby they will forfeit their deposits and profit from breach of contract as per
their original agreement. You could be held liable as the professional agent of
this client. Consult with a lawyer, and proceed carefully. Remember you are trying
to sell something for someone who does not yet own it. This is a specialized field
and should not be taken lightly. With your referral you will be worry free as the
listing contract and negotiations and sales contract have already been approved.
Refer it, or become an Assignment Proessional with AssignIt.ca.
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24. Why shouldn't we just wait till final closing?
Easy for you but with $1,500 monthly carrying costs and $15,000 final closing
costs this could add up to $30,000 or 50% of their profits if not putting them in
the red, why are we really waiting? Remember to keep your clients interest first
and foremost, a happy client will buy and sell many times over.
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25. Is it legal and binding?
Yes. Once all the conditions outlined in the Assignment Agreement are met
and the deposit cheque has been issued to the Developer, the contract is under seal
and considered legally binding providing the developer has signed the consent.
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