What is an Assignment Sale in BC Real Estate 

An assignment sale occurs when the original buyer of a property (often a pre-construction unit such as a condo or a townhouse) sells their interest in that property to another buyer before the original closing date with the developer. In real estate terms, this "interest" is the contract or right to purchase the property upon its completion. The original buyer is known as the "assignor," and the person who buys the contract is called the "assignee."

Key Aspects of Assignment Sales:

1. Contract Transfer:
   • The original contract between the developer (or builder) and the first buyer is transferred to a new buyer. This transfer includes all rights and obligations outlined in the initial contract, including any payments made towards the purchase price, specifications of the unit, and the remaining balance due.
2. Why Assign a Contract?:
   • Buyers might choose to assign a contract for various reasons, such as changes in their financial situation, personal circumstances, or because they've gained from an increase in property value since they first signed the contract and want to capitalize on the gain before the building is completed.
3. Financial Considerations:
   • Assignments can be financially beneficial for the assignor if the property value has increased, allowing them to sell their contract at a price higher than the original purchase price. For the assignee, this can also be an opportunity to purchase a new property that may already have appreciated in value.
4. Developer's Consent:
   • Most developers require that they approve any assignment sale. This may involve a fee and stipulations that the original buyer adheres to, such as continuing to hold some financial responsibility until the final closing or restrictions on advertising the sale publicly.
5. Legal and Tax Implications:
   • Assignment sales can be complex transactions requiring careful legal oversight to ensure that all contractual obligations are met. Additionally, there can be tax implications for both the assignor and the assignee, such as capital gains tax for the assignor if the property has increased in value.
6. Closing Process:
   • Upon completion of the building, the assignee typically takes over the original buyer’s role in the purchase process, including the payment of the balance of the purchase price to the developer and any other closing costs that are due.

Advantages and Risks:

Advantages:

• For the Assignor: A quick exit from the investment and potential profit from the sale of the contract.
• For the Assignee: A chance to buy into a property that may no longer be available directly from the developer or to enter a real estate market that has since seen price increases.

Risks:

• Market Risks: The market may change between the original sale and the assignment, impacting prices negatively.
• Complexity and Legal Risk: Mistakes in the transfer process can lead to significant legal and financial consequences.

Conclusion:

Assignment sales offer a flexible option for individuals involved in pre-construction real estate transactions but come with specific legal, financial, and procedural requirements. Both assignors and assignees should seek advice from real estate professionals, including lawyers and realtors, to navigate this process effectively.