When an Assignment Sale Buyer Backs Out in Ontario: What Assignors Can Do

You did everything right on your pre-construction condo assignment: you found a qualified buyer, got the builder’s consent, and signed an assignment agreement. Then, days or weeks before closing, your assignee tells you they can’t complete the purchase.

Here’s the part that surprises a lot of assignors: signing an assignment sale agreement doesn’t automatically release you from your own obligations to the builder. Depending on exactly what the builder’s consent says, you may still be on the hook if your assignee walks away.

This article looks at why that happens, what your private agreement with the assignee should have addressed, and what your practical options are if you’re facing this situation now.

Assigning a Contract Doesn’t Automatically Release You

An assignment transfers your contractual position under the Agreement of Purchase and Sale to your assignee — but transferring your position isn’t the same as the builder agreeing to let you off the hook entirely. That second step, sometimes described as a release or novation, only happens if the builder’s written consent actually says so.

Some builders’ consent documents formally release the original purchaser once a full assignment is completed. Many don’t. Instead, they keep the original purchaser liable as a backstop in case the assignee doesn’t perform — which means the assignment may have changed who’s expected to close, without changing who the builder can ultimately pursue if that person fails to.

Why This Matters When the Assignee Fails to Close

If your assignment agreement and the builder’s consent didn’t release you, the builder can generally still look to you — the original signatory — for the consequences of your assignee’s default, including whatever remedies the original Agreement of Purchase and Sale gives the builder against a defaulting purchaser.

This is exactly why the wording of the consent document matters so much, and why it’s worth having a lawyer review it closely before you sign an assignment, not after a problem shows up.

Two Different Deposits Are in Play

It’s easy to conflate two separate amounts: the deposit you originally paid the builder when you signed the purchase agreement, and any payment your assignee gave you as consideration for taking over the deal. If the assignee fails to close, your original deposit to the builder is dealt with under the builder’s agreement and consent terms; the payment the assignee gave you is dealt with separately, under your private assignment agreement. Keep the two threads distinct when you’re assessing your exposure.

What the Private Assignment Agreement Should Cover

Separate from your obligations to the builder, the agreement between you and your assignee is its own private contract. It should specify what happens if the assignee doesn’t close: whether any payment you were given is forfeited, whether the assignee owes you damages, and how a shortfall is handled. If your assignment agreement doesn’t address this clearly, you may be left arguing general contract principles rather than pointing to a specific, agreed remedy.

Your Practical Options When an Assignee Backs Out

1. Review both agreements first — the builder’s consent to assignment and your private assignment agreement — to see exactly what each says about your ongoing liability and your remedies against the assignee.
2. Contact the builder promptly. Some builders will work with you to find a replacement assignee or another solution short of default, particularly if you raise the issue before the closing date rather than after.
3. Pursue the assignee under your private agreement. If it gives you a claim for damages or lets you keep a payment the assignee already made, that’s a separate track from your dealings with the builder.
4. Consider completing the purchase yourself, if that’s financially realistic, to avoid a builder default entirely.
5. Get legal advice before the closing date, not after. Once a closing has already failed, your options narrow considerably.

Frequently asked questions