Assignment Sales of Pre-Construction Condos in Ontario

Assignment sales occupy a unique corner of Ontario's real estate market. If you have seen listings for pre-construction condos advertised before the building even exists — sometimes called "assignments" — you are looking at a transaction that works very differently from a standard resale deal, and one where the tax and legal risks are easy to miss.

An assignment sale of a pre-construction condo in Ontario is when the original purchaser (the assignor) transfers their rights under the original purchase agreement to a new buyer (the assignee) before the building registers. The assignee steps into the assignor's shoes — they take over the agreement with the builder and eventually complete the purchase and take title when the building is ready.

Why Assignments Happen

People sell their interests in pre-construction units for many reasons: their financial situation changed, they no longer need the unit, they bought multiple units as an investment and want to exit before closing costs hit, or they simply had an opportunity to make a profit on the increased value of the unit since they signed the original agreement.

For buyers, assignments can be attractive because the unit has already been designed and is nearing completion — reducing some (though not all) of the uncertainty of buying off-plan.

Builder Consent: The First and Most Important Issue

The original Agreement of Purchase and Sale with the builder almost always contains a clause addressing assignment. Most builders do not freely permit assignments — you typically need the builder's written consent to assign, and consent is not guaranteed.

Builders May Prohibit or Restrict Assignments Entirely

Some builder agreements prohibit assignment altogether, at least until a certain point in the project. If you bought a unit hoping to assign it later and the agreement does not permit assignment, you may have limited options.

Builder Consent Fees

When builders do permit assignment, they commonly charge an assignment consent fee — payable by the assignor. These fees vary widely between developers and projects. The fee may be a flat amount or a percentage, and it is separate from any deposit transfer or price adjustment. Before advertising an assignment, the original purchaser needs to know:

• Whether assignment is permitted under the original agreement
• What the builder's consent process requires (forms, timing, approval of the new buyer)
• How much the consent fee is and who pays it

In some cases, builders require the assignee to be pre-approved through their own mortgage channel or meet other conditions before they will consent.

What the Assignee Is Taking On

When you buy an assignment, you are not just buying a unit — you are assuming the obligations of the original purchase agreement with the builder. That means:

• You are bound by the original agreement's terms — including deposit structure, occupancy terms, and any "extras" or upgrades the original buyer selected
• You inherit the original closing timeline — which in pre-construction can still be months or years away, and may shift due to construction delays
• You are subject to the builder's PDI (Pre-Delivery Inspection) and warranty regime under TARION (Ontario's new home warranty authority)
• You pay the outstanding purchase price on closing — not just the price you agreed to with the assignor

The assignee typically pays the assignor the original deposit amount (reimbursing what was paid to the builder) plus any negotiated profit (the "lift"), and then takes over the obligation to pay the remaining balance to the builder on closing.

HST on Assignment Sales: A Significant and Nuanced Issue

This is where assignment sales regularly catch buyers and sellers off guard. HST implications on assignments are complex, fact-specific, and can be significant. Verify the current CRA rules and your specific situation with a lawyer or tax accountant before closing.

The Original Purchase May Have Been HST-Inclusive (for End Users)

New construction condos are subject to HST. When an individual buys a new home to occupy as their primary residence, they typically qualify for the New Home HST Rebate, which the builder applies on their behalf — effectively baked into the purchase price. This arrangement is common in builder agreements for owner-occupied purchases.

The Assignment Transaction Itself May Attract HST

The profit earned on an assignment (the "lift" above the original purchase price) may be subject to HST if the assignor is considered to be making a taxable supply. CRA's position on this has evolved and has been the subject of considerable attention.

If the original purchaser bought with the intent to assign (investment intent, not personal use), the CRA may take the position that HST applies on the assignment proceeds. If the intent was personal use but circumstances changed, the analysis is different. There is no one-size-fits-all answer — intent and conduct matter, and the tax consequences can be substantial.

HST at Final Closing (for the Assignee)

The assignee, when they ultimately close the purchase with the builder, will be acquiring a new home. Whether they qualify for the new home HST rebate (for owner-occupied) or the new residential rental property rebate (if they are renting it out) depends on their intended use. If neither rebate applies, the full HST is part of the closing cost.

This is not a minor number. Verify the current rebate thresholds and eligibility criteria with your lawyer before closing.

Why Legal Review of the Assignment Agreement Is Essential

Assignment transactions involve two agreements: the original purchase agreement with the builder, and the assignment agreement between assignor and assignee. Both need to be reviewed carefully.

What to Look for in the Assignment Agreement

• Who bears the risk of builder consent being refused?
• What happens if the closing is delayed by the builder?
• Who is responsible for any upgrade or amendment costs?
• What representations, if any, does the assignor make about the unit or the builder agreement?
• How are the deposits structured and protected?
• What conditions protect each party?

Unlike a standard resale transaction, there is no standard OREA assignment form that everyone uses — assignment agreements vary significantly, and poorly drafted ones leave both parties exposed.

Occupancy Period Considerations

Pre-construction condos often have an interim occupancy period — you move into the unit and pay "occupancy fees" to the builder before the building is registered and title actually transfers. The assignee steps into this arrangement and should understand what occupancy fees they will be paying and for how long.

Frequently asked questions