What the Original Builder Agreement Hid From an Assignment Buyer

The situation

Selam, a professional engineer, had gone through a separation the year before and needed to find a home of her own once the matrimonial property sold. Rather than compete in the resale market, she found a listing for something different: a unit in a pre-construction condo tower in Brantford, being sold not by the builder but by the original buyer, a software developer named Kenneth who had signed his agreement with the builder two years earlier and now wanted out before the building finished.

What Kenneth was selling was not the unit itself, which did not exist yet, but his contractual right to buy it once the builder finished construction. This kind of transaction is called an assignment. Kenneth had a binding purchase agreement with the builder, and an assignment lets him sell that agreement, and his place in line to eventually take title, to a new buyer before the building is even complete. Selam would step into Kenneth's shoes: she would pay Kenneth for the right to the agreement, then deal directly with the builder for the balance owing at closing, expected roughly fourteen months out. The agreed price for the assignment itself was about $95,000, on top of assuming the roughly $850,000 purchase price Kenneth had locked in with the builder two years earlier, at that point well below the going rate for a comparable new unit in the building.

Selam came to Treadstone Law with Kenneth's original builder agreement, the proposed assignment agreement between her and Kenneth, and a closing date she was hoping to keep on track so she could move her two children into stable housing before the next school year.

What the review found

An assignment purchase is really two layered contracts. There is the assignment agreement between the outgoing buyer and the incoming buyer, which is what Selam and Kenneth were negotiating directly. And underneath it sits the original agreement of purchase and sale between Kenneth and the builder, which Selam would be bound by the moment the assignment closed, whether she had read every clause or not. Builders draft that original agreement heavily in their own favour, and buyers signing it years earlier at a sales centre rarely negotiate its fine print. An assignment buyer inherits all of it unchanged.

Reading Kenneth's original agreement closely turned up three problems Selam had not been told about. First, the builder's consent was required before any assignment could proceed, and the agreement entitled the builder to charge an administration fee for granting that consent, a fee that in this agreement ran to roughly $9,000 and that neither Kenneth's listing nor his draft assignment agreement had disclosed to Selam. Second, the agreement contained an uncapped adjustment clause for development charges, the fees municipalities levy on new construction to fund infrastructure, meaning the exact dollar amount Selam would owe on closing was not fixed and could shift depending on charges the municipality assessed against the building before completion. Third, the agreement listed a set of standard closing adjustments, covering items like utility hookups and the builder's own legal costs on closing, that are common in new construction but are easy for a first-time assignment buyer to read past without registering as real dollars owed on top of the purchase price.

None of these terms were unusual for a builder agreement on their own. What made them a problem was that Kenneth's asking price and Selam's understanding of what she was paying had been built entirely around the $850,000 purchase price and the $95,000 assignment fee, with no allowance for the consent fee, the uncapped development charge exposure, or the accumulated closing adjustments. Left unaddressed, Selam would have arrived at closing owing several thousand dollars more than either she or Kenneth had accounted for, on a date she could not easily move because of her children's school schedule.

What we did

1. Reviewed the builder's original agreement before touching the assignment agreement. Because the assignment agreement was only ever going to be as good as what sat underneath it, we read Kenneth's full agreement with the builder first, line by line, to identify every fee, adjustment, and consent requirement Selam would be assuming.
2. Flagged the builder's consent fee and confirmed it in writing. We contacted the builder's lawyer to confirm the exact administration fee for consenting to the assignment, since builder agreements sometimes list a formula rather than a flat number, and got written confirmation of the roughly $9,000 figure before it could become a surprise at closing.
3. Quantified the development charge exposure as best the builder's records allowed. Uncapped adjustment clauses cannot always be turned into a fixed number in advance, but we obtained the builder's most recent estimate of development charges assessed against the project and used it to set Selam's expectations around a realistic range rather than an unknown.
4. Renegotiated the assignment price with Kenneth to reflect the real cost. Once the consent fee and the closing adjustment estimate were on the table, we negotiated with Kenneth's side to reduce the assignment fee, on the basis that his original listing price had not accounted for costs Selam was now confirmed to be assuming.
5. Built a closing cost estimate into the assignment agreement itself. Rather than leaving the adjustments to be discovered at closing, we had the assignment agreement itemize the consent fee, the estimated development charge range, and the standard closing adjustments Selam should expect, so the number she was budgeting toward matched what the builder would actually invoice.
6. Confirmed the builder's consent process would not delay the timeline Selam needed. Because Selam's move depended on a closing date she could not push back, we obtained the builder's assignment consent early rather than leaving it until shortly before completion, when a builder's own administrative backlog can add unplanned delay.

The outcome

Kenneth agreed to reduce the assignment fee from roughly $95,000 to about $80,000, a $15,000 reduction that offset most of the consent fee and the estimated development charge exposure Selam had not originally priced in. The remaining gap, a few thousand dollars in standard closing adjustments, stayed with Selam, since those costs are a normal part of any new construction closing and not something a seller can reasonably be asked to absorb. Neither side got everything they wanted: Kenneth received less than his original asking price, and Selam still faced meaningful closing costs beyond the headline purchase price. But both went into the transaction with an accurate number instead of a surprise.

The building's closing came roughly fourteen months later, close to the original projected date, and the final development charge adjustment landed within the range the builder's estimate had suggested. Selam closed on her unit with her children able to start the school year in stable housing, and without the several-thousand-dollar shortfall that would otherwise have hit her at the worst possible moment. The compromise on price reflected a real cost to Kenneth and a real cost Selam still had to plan around, but it replaced an unknown with a number both sides had agreed to in advance.

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