When one party transfers their right on one property to another, it is known as an assignment. There are two types of assignment, legal and equitable.
If we look at a contract, one party (the assignor) can transfer their right under a contract to a third party (the assignee). The assignor does not need the consent of the other party in the contract as per the express terms and conditions of the contract.
While rights under a contract can be assigned, obligations under the contract cannot be transferred to a third party. Novation is the only method to transfer obligations.
As per the clauses outlined in the Law of Property Act 1925, legal or debt benefits can be assigned to another person. For a legal assignment, there are few requirements:
Any legal sales transaction is an assignment where the assignor (original purchaser) of the property transfers their rights and obligations under the contract to the new assignee (purchaser). In simple terms, the new assignee pays a fee for purchasing the desired property.
The assignment is considered to take place from the original agreement of sale between the original purchaser and developer. The assignment happens before the property is completed.
The assignee assumes all the obligations and duties of the assignor. The original agreement of sale includes these duties and obligations such as included items, deposits, required disclosure statements and completion date.
The assignee is granted title to the property once the property gets completed. All assignment fees are borne by the original purchaser and is charged by the developer.
The legal owner of the property is the developer till the transfer of title happens legally on completion of the property. For all assignment transactions, the developer needs to give written consent.
Before project completion, many investors end up selling their builder agreement properties. Assignment is the process in which the interest of the purchaser-investor in the builder agreement of purchase and sale is transferred to a new buyer or assignee.
Builder’s written consent is required in before assignment can take place by the purchaser-investor. Many builders can also withhold the assignment clause as per their agreement.
Whether you are moving into the property or purchasing a condo for investment, it is advisable to get the agreement reviewed by a real estate lawyer. You can understand your options and request an amendment to the agreement of purchase and sale to allow for future assignment.
Any type of property can be assigned to a person, whether it is resale or a pre-construction one. For the assignment to be possible, there should not be any restrictions against assignment in the original contract.
Builder’s requirements, process and fees should be determined once the buyer confirms that they possess the right to assign the agreement as per the contract. If the agreement prohibits assignment and the builder refuses to allow them, the original buyer will have to wait to sell the property after closing.
In many circumstances, builder’s consent to agreement assignment can be obtained even if such consent was not present in the original contract. Many builders waive the assignment prohibiting clause from the agreement once builder specified criteria and forms with fees are followed.
The sales office can help in determining if the builder can provide consent and under what conditions. Different builders have a varying set of processes on assignment of their properties.
The purchase price on the Agreement of Purchase and Sale with the Builder is already inclusive of HST and a HST New Housing Rebate. However, there are some cases where the Builder will not credit the HST new Housing Rebate on closing as a result of an Assignment, despite the eligibility of the Assignee/Purchaser for the Rebate. If you are buying on Assignment and the Builder does not credit you the HST New Housing Rebate, you will need to pay the same to the Builder as an Adjustment on final closing.
To recover your HST New Housing Rebate, you will need to apply for the HST New Housing Rebate yourself after final closing with the Builder. To be eligible for the same, you will need to have acquired the property with the intention of moving into the property and that you will have actually moved into the property after closing with the Builder. Please note that if the Assignor had used the property for rental purposes after taking possession on occupancy, it will affect your eligibility for the HST New Housing Rebate and it is important to ensure the Assignor has not done so.
If you are buying on Assignment for investment purposes, you will need to obtain an HST Rental Rebate by entering into a lease to a Tenant to move into the property for at least a one-year period and apply for the HST Rental Rebate within 2 years of your final closing.
You are advised to speak to a real estate lawyer about the HST Rebate applicable to your Assignment purchase.
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