An assignment sale is a real estate deal where the original buyer of a property, called the assignor, sells their rights and obligations under a purchase agreement to a new buyer, called the assignee, before the deal closes. In Ontario this happens most often with preconstruction condos and homes, where the first buyer signs an agreement with the builder, then transfers that contract to someone else before the building is registered and title changes hands.
Most of the confusion around assignment sales comes down to money. Who pays the harmonized sales tax, how the profit is taxed, and who covers land transfer tax. Those answers changed in 2022 and 2023, and many older articles still describe the old rules. This guide walks through how an assignment works in practice, what each side pays, the Ontario details that trip people up, and the mistakes that cost the most.
What is an assignment sale, and why do people use one?
An assignment sale lets the first buyer step out of a purchase before it closes and put a new buyer in their place. The first buyer never takes title. Instead they sell the contract itself, along with the deposits already paid and any rights to upgrades or incentives. The new buyer then completes the purchase with the builder.
Before a preconstruction building registers, what you hold is not legal title. You hold an equitable interest, which is a contractual right to acquire the unit once it is built and registered. An assignment is the sale of that right.
What do assignor and assignee mean?
The assignor is the original buyer who signed the agreement with the builder and now wants out. The assignee is the new buyer who takes over that agreement and agrees to honour its terms, including the remaining payments to the builder and any conditions in the original contract.
Why assign instead of waiting to close?
For the assignor, an assignment is an exit. Plans change over the years a building takes to complete. An assignment frees up the deposit, avoids the financing and closing obligations, and can capture a profit if prices have risen since the original purchase. For the assignee, it is a way into a building that has already sold out, sometimes with a shorter wait to move in and a chance to take over a price set years earlier.
The trade is risk. The assignee is buying a contract for a home that does not exist yet, so construction delays, builder problems, and financing all matter. That is why both sides should have a lawyer review the deal before signing.
How does an assignment sale work step by step in Ontario?
Every assignment is shaped by the original agreement with the builder, so the first job is always to read that agreement. A typical assignment in our practice runs like this.
- Review the original agreement of purchase and sale and find the assignment clause. It tells you whether assignment is allowed, on what terms, and what the builder charges.
- Confirm the builder will consent, and on what conditions. Some builders restrict marketing, others require a construction milestone or proof the assignee can qualify financially.
- Negotiate price and who pays what. The assignee repays the assignor the deposits already paid to the builder, plus or minus any premium, and the parties agree who covers the builder fee, the HST, and the adjustments.
- Sign the assignment agreement. Many deals use the Ontario Real Estate Association standard forms, Form 145 for freehold homes and Form 150 for condominiums, with the original agreement attached as a schedule. Lawyers often use a tailored agreement instead, because the standard form rarely covers the tax and deposit wording properly.
- Apply for builder consent and pay the builder fee. The builder reviews the assignee and signs off. This step can take days or a few weeks depending on the developer.
- Close the assignment between assignor and assignee, then complete the final closing with the builder. At final closing the assignee pays the balance owing to the builder, the land transfer tax, and the closing adjustments, and takes title.
For condominiums there is usually an interim occupancy period. The building is finished enough to live in but not yet registered, so the occupant pays a monthly occupancy fee to the builder rather than a mortgage. If the assignment happens during this period, the assignee takes over those occupancy payments.
Who pays HST on an assignment sale in Ontario?
In most cases the assignor charges and remits the harmonized sales tax, and the assignee pays it as part of the price. Since May 7, 2022, the rules are much simpler than they used to be. Under changes to the federal Excise Tax Act, all assignment sales of new or substantially renovated residential housing are taxable for HST, no matter why the assignor originally bought the unit. Before that change, whether HST applied turned on the assignor’s intentions, and many individual sellers wrongly assumed they owed nothing.
Ontario HST is 13 percent. The assignor collects it from the assignee and remits it to the Canada Revenue Agency. If the assignor is a nonresident of Canada, the rule flips and the assignee must remit the tax directly.
How is the profit on an assignment taxed as income?
HST is one tax. Income tax on the profit is a separate question, and it is where assignors are most often caught off guard. Profit on an assignment is taxed in one of two ways. As business income, which is fully taxable, or as a capital gain, where only part of the gain is taxed. Business income costs you more.
Since January 1, 2023, a federal rule decides this for many sellers. The residential property flipping rule treats the profit as business income, fully taxable, when you owned the home, or the right to buy it, for less than 365 days before you sold. The right to acquire a housing unit is specifically included, so a quick assignment of a preconstruction contract is squarely within the rule. When it applies, the profit is fully taxable, the principal residence exemption is not available, and a loss is treated as nil rather than deductible.
The clock matters. The 365 days counts from when you acquired the right, and it resets once you take legal title to the finished home. So an investor who assigns the contract a few months after signing is in very different territory than an owner who closes, takes title, and lives in the home for more than a year.
There are exceptions for genuine life events. The rule can be set aside where the sale reasonably results from things like a death in the family, a serious illness or disability, a marriage or common law breakdown, a new child or a relative moving in, a job loss, an eligible work relocation, insolvency, or a threat to personal safety.
Here is the honest part. Even if you hold the right for more than 365 days, the profit is not automatically a capital gain. Whether it is business income or a capital gain still depends on the facts, including why you bought, how long you held, and your history of similar deals. The Canada Revenue Agency audits assignment profits closely, and getting the reporting wrong can bring penalties on top of the tax. Talk to a tax advisor before you file.
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Who pays land transfer tax on an assignment?
The assignee pays the land transfer tax, not the assignor. The reason is simple. The assignor never takes title, and land transfer tax is tied to taking title. The assignee pays it at the final closing with the builder, when the property is registered in their name. If the property is in Toronto, the assignee also pays the City of Toronto municipal land transfer tax on top of the provincial tax.
Here is the Ontario detail most articles miss. The province calculates land transfer tax on the value of the consideration, and the Ministry of Finance defines that broadly. If you pay the assignor a premium on top of the builder’s price, that premium can form part of the consideration the tax is calculated on. In other words, the assignee can pay Ontario land transfer tax on more than the original builder price.
There is also a technical point your lawyer will handle. Under the Land Transfer Tax Act, an assignment is itself a disposition of a beneficial interest in land, and the Act has timing rules tied to registering within 30 days. In a normal assignment that completes at final closing, this usually collapses into the single tax paid on registration. It is one more reason the deal needs to be structured and documented properly rather than papered with a generic form.
If the assignee is buying their first home and qualifies, the first time homebuyer refund can offset some of the provincial tax, and Toronto has its own refund. If the assignee is a foreign national, Ontario’s nonresident speculation tax can also apply. These depend on the buyer, so confirm before closing.
Is the builder consent required, and what does it cost?
Usually yes. The original agreement controls whether you can assign at all, and on what terms. Most builders require written consent, and many charge an assignment or administration fee for it. That fee can be a flat amount, a percentage of the price, or both, and it varies widely from one developer to the next.
Builders also set conditions. Common ones include a requirement that a set percentage of the deposit be paid first, a ban on advertising the unit publicly or on a listing service, a construction milestone before assignment is allowed, and proof that the assignee can complete the purchase. Some projects prohibit assignment entirely. Even where the agreement appears to bar it, builders will sometimes consent on terms, so it is worth asking before you assume the answer is no.
What are the most common mistakes we see?
In our practice the same problems come up again and again. Each one has a real cost.
- Assuming the profit is a capital gain. If the flipping rule applies, the whole profit is taxed as business income, and unreported amounts can draw penalties on top of the tax.
- Leaving the deposit reimbursement out of the written agreement. Without the right wording, HST can apply to the deposit, not just the premium, which inflates the tax.
- Marketing or signing before checking the assignment clause and getting builder consent. This can breach the original agreement, trigger fees, or put the whole deal at risk.
- Underbudgeting the closing costs as the assignee. Land transfer tax on the premium, HST, occupancy fees, development charges, and repaying the assignor’s deposit before final closing all add up, and most of these cannot be financed.
- Skipping a lawyer review of the original agreement. The assignee inherits every term in that contract, so the time to read it is before signing, not after.
Should you assign or wait to close?
There is no single right answer, and it turns on your plans, your timeline, and the tax picture. The table below is a starting point, not advice. If you are weighing this against selling the property in Ontario after you close, that is a different calculation worth running with a lawyer.
| Assigning may make sense if | Holding to closing may make sense if |
|---|---|
| Your plans changed and you want your deposit back before the building registers | You can carry the unit and want flexibility on how the profit is eventually taxed |
| You want to avoid the final closing costs and land transfer tax | You may qualify for the principal residence exemption by living in the home |
| Prices have risen and a buyer will pay a premium now | You are close to the one year mark and want the timing to work in your favour |
| You do not want the financing and occupancy obligations | You plan to keep the unit as a long term rental |
Who is responsible for what?
Most of these items are negotiable and should be written into the assignment agreement. This is how the responsibilities usually fall.
| Item | Assignor, original buyer | Assignee, new buyer |
|---|---|---|
| Deposit paid to the builder | Gets it back from the assignee | Repays the assignor’s deposit |
| Premium on the assignment | Receives it, taxable as income | Pays it on top of the original price |
| HST on the assignment | Collects and remits, unless a nonresident | Pays it in the price, may use it toward a rebate |
| Builder consent and fee | Often pays the fee, negotiable | Must qualify with the builder |
| Final closing with the builder | Not involved, never takes title | Completes the purchase, pays the balance |
| Land transfer tax | None, never takes title | Pays it at final closing, including on any premium |
| Occupancy fees and adjustments | Usually none after the assignment | Usually responsible at and after final closing |
Frequently asked questions
Can I assign any preconstruction contract in Ontario?
Not always. Your right to assign comes from the original agreement with the builder. Some contracts allow it on terms, some restrict it, and some prohibit it. Most builders that allow assignment require written consent and charge a fee. Read the assignment clause first, and ask the builder before you market the unit.
Do I avoid land transfer tax by assigning?
The assignor avoids it because they never take title. The assignee does not. The assignee pays Ontario land transfer tax, plus Toronto’s municipal tax if the property is in Toronto, at the final closing with the builder. Any premium paid to the assignor can form part of the amount the tax is calculated on.
What is interim occupancy and who pays the occupancy fees?
With condominiums, there is often a stretch where the building is ready to live in but not yet registered. During that interim occupancy period the occupant pays a monthly fee to the builder instead of a mortgage. Whoever holds the contract at that time carries those fees, so an assignee who takes over during occupancy takes over the payments.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
