Buying a home · Pre-sale assignments
A pre-sale assignment is a layered transaction: you are buying a contract from a previous buyer, who is buying a unit from a developer that does not yet exist. Each layer has its own terms, its own risks, and its own consents. The contract review on this kind of file is the work.
The structure
On a typical assignment, you are looking at three documents at the same time: the original developer pre-sale contract (signed years earlier between the developer and the original buyer), the assignment contract (transferring the original buyer's rights to you), and the developer's consent to the assignment (if the developer's consent is required, which it almost always is).
The assignment contract layers on top of the developer contract; it does not replace it. That means most of the original contract's terms — closing date, unit specifications, deposit structure, default provisions, recourse on construction issues — flow through to you on completion. Reading the original contract is the only way to know what you are inheriting.
What we look at
The cash timing
On most assignments, the assignee writes two big cheques: one at the time of assignment, to reimburse the assignor for deposits already paid to the developer plus the assignment premium; and one at completion, when the building is ready and the developer collects the balance of the purchase price.
The first cheque can be substantial — a 15 to 20 percent deposit stack on a $1M unit is $150,000 to $200,000 — and it ties up your cash long before you can move in. Plan for that.
Frequently asked
A pre-sale assignment is a transaction where the original buyer of a pre-sale (pre-construction) condo contracts to transfer their rights and obligations under the original purchase agreement to a new buyer (the assignee), before the unit completes. The assignee steps into the shoes of the original buyer and ultimately closes with the developer when the building is ready for occupancy. The assignment is a separate contract layered on top of the original developer contract.
Almost always, yes. Most developer pre-sale contracts in BC contain restrictions on assignment — outright prohibitions in some cases, consent-required clauses in most. Reading the original developer contract before you commit to an assignment is the most important step in the file. We have seen assignments fall apart because the developer simply refused consent under a clause the buyers had not focused on.
Pre-sale assignments are taxed differently than resale homes. GST applies to the assignment fee (the premium paid to the assignor over their original purchase price) on most assignments of new residential property. The federal income-tax treatment of the assignor's profit can also be complex — depending on intent, the gain may be on income account rather than capital. We coordinate with your accountant on the tax side; what we focus on is making sure the assignment contract handles the GST allocation cleanly.
On most assignments, the assignee reimburses the assignor for the deposits already paid to the developer (often a 15 to 20 percent stack of progressive deposits) at the time of the assignment. The assignee then carries those deposits forward to closing with the developer. This deposit reimbursement is a major component of the cash required at the assignment stage — long before the building completes.
The biggest ones are: developer non-consent; the building's completion date being delayed beyond the assignor's anticipated closing; specifications, layouts, or features changing between contract and completion; market shifts that leave the unit worth less than the assignment price plus deposits; and the original contract terms (some of which the assignee inherits without amendment) containing surprises. Reviewing the original developer contract is non-negotiable.
We need to see the original developer contract, the assignment contract, the consent from the developer, and the deposit ledger before we can quote on the file. From the day everything is in hand, we generally need 5 to 10 business days to close cleanly — more if there are unusual terms in either contract. Build in extra time on assignment files; they are not the file type to leave to the last week.
Send us both contracts — the original developer agreement and the proposed assignment — together with the deposit ledger. We'll come back with a written review and a flat-fee quote.