Assigning a Pre-Construction Condo Agreement in Ontario

If you can no longer close on a pre-construction condo, you may be able to sell your contract to someone else before completion. This is called an assignment sale.

It can look simple, but consent, fees and tax can change the result. Here is what to check before you list your contract.

What an assignment is

In an assignment, you transfer your rights under the agreement of purchase and sale to a new buyer, who then completes the purchase with the builder. You are selling the contract, not the finished unit.

Assignments often come up when a delay or a change in your finances makes closing difficult. The new buyer will look closely at the terms you signed, so the details of your agreement matter to both of you.

Developer consent and fees

Whether the developer must consent, and whether it can charge an assignment fee, depends on what your agreement says. No statute sets these terms, so read the assignment clause closely.

Be careful with conditions in the agreement. The Tarion Addendum overrides any conflicting terms, and early-termination conditions not allowed by the Addendum cannot be enforced.

Your deposit, delays and interim occupancy

Before you assign, it helps to know what protects the money already paid on a new condo and how delays are treated. These points are a starting place for you and for any buyer.

• Ontario condo builders generally must hold deposits and other money received for a condo project in trust.
• For a new condo unit, Tarion protects deposits and other payments, including money paid for upgrades and extras, up to $20,000, plus a limited amount of interest that has built up.
• Payments made to reserve or hold a unit before the purchase agreement is signed have no Tarion deposit protection.
• A delay on a new condo can lead to Tarion delayed-occupancy compensation of up to $7,500 in total, with living expenses paid at a fixed $150 a day and no receipts needed.
• A condo builder that fails to give 10 days' notice of an occupancy delay must pay the buyer $1,500.

Interim occupancy fees apply only during the interim occupancy period. They are not credited to the purchase price, and the buyer owes them whether or not they move in. Whether Tarion protection carries over to a new buyer after an assignment, and how claim deadlines apply, depends on your agreement and the facts, so confirm it with a lawyer.

HST on an assignment

From May 7, 2022, every assignment sale of newly built or substantially renovated residential housing is taxable. The CRA has said tax applies to the whole amount, including any deposit the first buyer paid to the builder, but the treatment of deposits may be changing, so it is worth confirming the current rule with an accountant before you price your assignment.

On rebates, only one new housing rebate application can be made for each new home. An assignee can file one application directly with the CRA covering the tax paid to both the builder and the assignor.

Rebates can change what a new buyer actually pays. Ontario's HST New Housing Rebate gives back 75% of the provincial part of the HST on a qualifying new home, up to $24,000. First-time buyers of new homes may qualify for more: the federal FTHB rebate refunds 100% of the GST (or the federal part of the HST) on a new home valued up to $1 million, with reduced relief between $1 million and $1.5 million, and the Ontario FTHB rebate refunds up to $80,000 of the provincial part of the HST on the same eligibility conditions. These first-time buyer rebates come with eligibility conditions of their own, and whether they reach a buyer who takes over an assigned agreement depends on the facts, so an accountant should confirm this before anyone relies on them.

A temporary Ontario top-up applies to homes bought from a builder between April 1, 2026 and March 31, 2027, and the buyer is responsible for confirming eligibility and must repay the CRA if the builder credited a rebate the buyer was not entitled to. Whether it reaches a buyer who takes over an assigned agreement depends on the facts, so an accountant should confirm this before anyone relies on it.

Rules on deposits and on conditions for assigned agreements have been described differently by the CRA, so confirm the current treatment with an accountant.

Income tax on the profit

The CRA says profit from an assignment sale must be reported as business income in the tax year you assigned your rights. That is different from how many people expect a home sale to be taxed.

Whether other income tax rules apply to your assignment depends on your facts, so it is worth confirming with an accountant before you sign. Keep your agreement, the assignment documents and records of what you paid, since they will help whoever prepares your return.

Before you assign

A little preparation makes an assignment smoother. Work through these steps before you list your contract.

• Reread the assignment clause and any Schedule B items.
• Ask the developer in writing about consent and fees.
• Gather your agreement, the Tarion Addendum, the disclosure statement and your payment receipts.
• Estimate HST on the full assignment price, including your deposit.
• Speak to an accountant about reporting the profit as business income.
• Have a lawyer review the assignment agreement before anyone signs.

Frequently asked questions