Assignment of Purchase Agreement
An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. 3 min read
An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. In this situation, the buyer is the assignor, and the third party is the assignee. Under the agreement, the assignee pays a higher price. This agreement must take place in the time between when the assignor agrees to buy the home, but before the contract closes with the builder.
With this period, the assignor never takes the title of the property. Instead, the title is put in the name of the assignee. This is informally known as "flipping a home." The flipping of a home occurs when:
- The original buyer enters into a purchase contract and assigns the contract to the third party before closing ends.
- The original buyer makes a profit from the sale.
If the sale does not close, the seller will lose time, money, and resources.
Advantages and Disadvantages of an Assignment of Contract
There are several advantages of an assignment of contract. With an assignment of contract, you are not actually flipping a home. Instead, you are flipping the contract, which means you don't have to have the financial backing to purchase the property. Not only do you not close on the property, but you will also not have to pay any closing costs or take on any additional expenses.
For wholesale flippers, using the assignment of contract is a way to save thousands of dollars each month. For example, if the closing costs per property are $1,000, and you "flip" 10 properties, that is a $10,000 savings.
Wholesalers only need to put down the purchase contract deposit amount that will be held in escrow with the title company or with an attorney. The lower the deposit, the lower the risk that will be assessed. Deposits may be as low as $10 or $100 and will be easier to lose if there are any delays or issues.
An assignment of purchase agreement allows the assignee to buy into new and desirable neighborhoods that are no longer available through the builder.
The main disadvantage of an assignment of contract is the risk of not finding a buyer. If a third-party buyer is not found, and you are under contract, you are responsible for completing the contract. Additional responsibilities include the responsibility of:
- Existing liens.
- Property taxes.
In addition, if the financing of the assignee cannot be obtained before the closing, this may cause the assignor to be responsible for the closing costs and the purchase of the property. The assignor may also not be able to get his or her deposits returned.
Obtaining the Builder's Consent
For an assignment of a purchase agreement to be valid, the builder and assignor must first have a valid legal contract in place that shows the assignor is obligated to purchase a home or condominium unit from the builder.
The buyer may limit how the property can be sold, including that the property cannot be listed on the MLS (multiple listings service). If it is, it is seen as a competing with the builder. If the assignor puts the property on the MLS, it will be a breach of contract, and the builder will be entitled to damages or rescission of the contract. The buyer will also be able to retain any deposits that have been paid and any other money paid for upgrades and extras.
The assignor must also clearly state the property is an assignment of an agreement of purchase with the builder and not a direct sale from the assignor.
Preparing an Assignment of Purchase Agreement
When preparing the agreement documentation, there are questions that should be asked to determine responsibility. Some of the questions to be asked are:
- Who will be preparing the documents?
- Who will pay the cost to prepare the documents?
- Will the assignment agreement and written consent of the builder be prepared by the builder's attorney? And will they cover the costs?
- Can terms agreed to by the assignor and builder be negotiated by the assignee? If so, who will cover the costs, and how will they be resolved?
A detail that should also be negotiated is the responsibility of paying the commission of the assignment agreement.
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Purchase Contract Assignment Form
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Updated June 22, 2023
A purchase contract assignment is between a holder (assignor) that transfers their interest in buying real estate to someone else (assignee). Before the closing, it is common to assign a purchase contract to a business entity or the person whom the loan or mortgage will be under. It’s also accepted for a contract holder to sell their rights to buy a property for a fixed amount.
Depending on the purchase contract signed between the seller and assignor, the seller may be required to give their consent before the agreement is legally valid.
Table of Contents
- Simple Version
- Advanced Version
- Step 1 – Come to a Verbal Agreement
Step 2 – Share the Purchase Contract
Step 3 – create an assignment, step 4 – attach and close.
- Sample : Purchase Contract
How to Write
Download: PDF , MS Word , OpenDocument
How to Assign a Purchase Contract (4 Steps)
This guide is for assignments when selling a purchase contract to a 3rd party .
Step 1 – Come to a Non-Binding Agreement
The buyer (assignor) in the original purchase contract and the new buyer (assignee) will need to come to an agreement. In most cases, the assignee will offer a fixed amount to buy the contract.
The assignor may need to require the assignee to sign a non-disclosure agreement (NDA) as the details included in the purchase contract are confidential.
After signing the NDA, the assignor should share the purchase contract with the assignee.
After the purchase contract is shared an assignment should be written and signed. If there is a payment as part of the assignment, it should be paid at the time of signing.
If the seller’s consent is required, the assignment will need their signature to be valid.
After the assignment is signed, it should be attached to the original purchase contract. The assignee will be recognized as the buyer and will be required to close on the property in accordance with the terms of the purchase contract.
Sample Purchase Contract
Real estate purchase contract assignment.
I. THE PARTIES. This Real Estate Purchase Contract Assignment Agreement (“Agreement”) is made on [ EFFECTIVE DATE ] (“Effective Date”) by and between:
Assignor : [ ASSIGNOR’S NAME ], (“Assignor”) with a mailing address of [ ADDRESS ], hereby transfer and assign to:
Assignee : [ ASSIGNEE’S NAME ], (“Assignee”) with a mailing address of [ ADDRESS ], that agrees to assume all rights and interest in a purchase contract between the Assignor and:
Seller : [ SELLER’S NAME ], (“Seller”) with a mailing address of [ ADDRESS ], for a purchase contract dated on [ DATE ] (“Assignment”).
The above-referenced Assignor and Assignee may each be referred to as a “Party” and collectively referred to herein as the “Parties.”
II. THE PROPERTY. The Assignment is regarding real property located at the following street address: [ ADDRESS ].
Additional Description: [ ADDITIONAL DESCRIPTION ].
III. TRANSFER. The Parties agree that the Assignor is transferring the Assignment to the Assignee for the following:
☐ – Fixed Payment of $[ AMOUNT ] (“Payment Amount”). The Assignment is to be transferred in exchange for the Assignee paying the Assignor the Payment Amount within [ # ] days of the Effective Date.
☐ – No Payment. The Assignor is transferring the Assignment for no payment or compensation. The Assignee’s consideration shall be recognized as the undertaking of any liabilities or obligations in the Assignment.
☐ – Gift. The Assignor is granting the Assignment as a gift to the Assignee.
☐ – Other. [ DESCRIBE OTHER ]
IV. SELLER APPROVAL. For this Agreement to be in effect: (check one)
☐ – It is REQUIRED for the Seller to approve this Agreement within [ # ] days of the Effective Date. If the Seller does not approve this Agreement or fails to sign, this Agreement, then this Agreement shall be considered void.
☐ – It is NOT REQUIRED for the Seller to approve this Agreement. Upon the execution by both Parties, this Agreement shall be in full force and effect.
V. ASSUMPTION. The Assignee acknowledges and agrees to assume the transfer and ownership of all liabilities, obligations, and claims that currently exist or may in the future regarding the Assignment. As of the Effective Date, the Assignee agrees to comply with all terms, make all payments, and perform all the conditions, covenants, and any other duties as part of the Assignment.
VI. PARTIES’ REPRESENTATIONS. The Assignee acknowledges that they have a full understanding of the Assignment and the terms of this Agreement. The Assignor further warrants that they own the rights transferred in the Assignment and understand the terms of this Agreement. Both Parties agree to provide and complete any obligations under this Agreement or the Assignment.
VII. SEVERABILITY. If any term, covenant, condition, or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.
VIII. GOVERNING LAW. This Agreement shall be governed under the laws located in the State of [ STATE ].
IX. WAIVER. The failure of either Party to enforce any provision of this Agreement shall not be deemed a waiver or limitation of that Party’s right to subsequently enforce and compel strict compliance with every provision of this Agreement.
X. ADDITIONAL TERMS. [ ADDITIONAL TERMS ]
XI. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement between the Parties. No modification or amendment of this Agreement shall be effective unless in writing and signed by both Parties.
Assignor Signature: ____________________________ Date: _____________
Print Name: ____________________________
Assignee Signature: ____________________________ Date: _____________
Seller Signature (if required): _______________________ Date: _____________
Section 1 The Parties
(1) Effective Date For Purchase Contract. The calendar date considered the first day of this document’s effect on the Parties involved must be established in the first section.
(2) Assignor Of Real Estate Interest. The Party who shall release his or her interest on the concerned real estate upon the satisfaction of this agreement’s conditions must be identified with a record of his or her full name and mailing address. If Assignor is a Business Entity then make sure the name recorded is its entire legal name.
(3) Assignee Of Real Estate . The Party that will be able to express a rightful interest or claim on the real estate or real property through this document will need to be named. This will require a record of his or her name and address. Bear in mind, a Business Entity acting as the Assignee must have its legal identity including status suffix (if any) produced.
(4) Seller Of Real Estate. The Property Owner or the Party selling the concerned real estate requires his or her name presented.
(5) Date Of Purchase Contract. Furnish the time and date of the original purchase contract this agreement concerns.
Section 2 The Property
(6) Property Location. The concerned real estate must have its physical address (where it may be visited in person) documented.
(7) Property Description. In addition to the location of the concerned real estate, it is recommended that an adequate description be provided. For instance, define any type of structure on the property (i.e. residential building, office building with parking lot, etc.). Ideally, the property’s legal description can be reported here or attached to this agreement.
Section 3 Transfer
(8) Fixed Payment. The manner by which the Assignor releases his or her interest over the concerned real estate to the Assignee will need to be discussed in this paperwork. If this transfer of interest results from a payment from the Assignee to the Assignor then mark the “Fixed Payment” checkbox (found in the third section). This statement will require the exact “Payment Amount” and the maximum number of days after the Effective Date when this payment must be received from the Assignee in order for it to be on time and in compliance with this agreement.
(9) No Payment. Select the second checkbox if “No Payment” will be required of the Assignee to assume the real estate interest being discussed from the Assignor.
(10) Gift. If this transfer of interest is considered a gift from the Assignor to the Assignee then select the “Gift” checkbox.
(11) Other. There may be other circumstances or conditions the Assignee and Assignor have agreed to fulfill for this assignment to occur. For instance, the release of interest may be dependent on the termination of the Assignee from a shared Business Entity with the Assignor. In any case, if none of the statements made in the third section accurately define the basis for this assignment, select the “Other” checkbox and provide this definition to the space available.
(12) Required Seller Approval. This agreement has thus far dealt with the Assignor and the Assignee. If the Seller of the real estate must approve this assignment then the first statement made in Section IV should be selected and a report the number of days within the effective date of this agreement when such approval must be gained (from the Seller) will be required.
(13) No Seller Approval Requirement. Select the second statement made by Section IV if this agreement may require only the consent of the Assignor and the Assignee to be effective.
(14) Governing Law. Report the state that will hold authority over this assignment and the agreement being developed.
Section 10 Additional Terms
(15) Remaining Agreement Conditions. All the conditions and the terms that the Assignor and Assignee require to be complied with should be contained within this agreement before it is signed. Section X will supply the space for such information to be presented and will allow the title of additional paperwork that will be attached to be included. This area may be left unattended if the information produced thus far represents the full scope of the obligations each Party must live up to for this assignment to proceed to completion.
(16) Assignor Signature And Date. The Assignor making this assignment should sign his or her name and dispense the date this action was completed.
(17) Assignor Printed Name.
(18) Assignee Signature And Date. The Recipient of this assignment, the Assignee, should review this agreement then sign his or her name. The date of the Assignee signature must also be reported at the time of signing.
(19) Assignee Printed Name.
(20) Seller Signature And Date. If it has been indicated that the Seller must provide consent, then he or she must sign this paperwork upon its completion and a thorough review so that this assignment may proceed. His or her signature date will also be required.
(21) Seller Printed Name.
- Practical Law
Assignment and Assumption of Purchase and Sale Agreement (Commercial Real Estate Purchase and Sale)
Practical law standard document 5-524-5245 (approx. 9 pages).
- United States
- Français fr
Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit
From: Canada Revenue Agency
Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change. For more information about the legislative amendment, refer to GST/HST Notice 323, Proposed GST/HST Treatment of Assignment Sales .
GST/HST Info Sheet GI-120 July 2011
This info sheet explains how the GST/HST applies to the assignment of a purchase and sale agreement for the construction and sale of a new house.
The term "new house" used in this info sheet refers to a newly constructed or substantially renovated house or condominium unit. A house that has been substantially renovated is generally given the same treatment under the GST/HST as a newly constructed house. Extensive modifications must be made to a previously occupied house in order to meet the definition of a "substantial renovation" for GST/HST purposes. For a full explanation of the factors to consider in deciding if a substantial renovation has taken place, refer to GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate .
In this publication, a house includes a single unit house, a semi detached house, a duplex, a rowhouse unit and a residential condominium unit (condo unit), but does not include a mobile home or floating home.
Where a person enters into a purchase and sale agreement with a builder for the construction and sale of a new house, the person may be entitled to assign their rights and obligations under the agreement to another person (an assignee). Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee.
This publication addresses the situation where
- a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
- the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.
Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.
For GST/HST purposes, the term "builder" is specifically defined and is not limited to a person who physically constructs a house. There are several instances in which an individual or other person is a builder for GST/HST purposes. For more information on persons who are included in the definition of "builder", refer to GST/HST Memorandum 19.2, Residential Real Property .
This info sheet addresses only whether a person is a builder as described in the following paragraph.
Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances
A builder includes a person who acquires an interest in a new house before it has been occupied by an individual as a place of residence or lodging for the primary purpose of selling the house or an interest in the house or leasing the house, other than to an individual who is acquiring the house otherwise than in the course of a business or adventure or concern in the nature of trade. When that person is an individual, the individual must acquire the interest in the course of a business or an adventure or concern in the nature of trade in order to be a builder described by this paragraph.
Even if a person is not a builder as described in the preceding paragraph, the person may be a builder based on one of the other definitions of the term as described in GST/HST Memorandum 19.2.
Assignment of a purchase and sale agreement by a person other than an individual
Where a person other than an individual (e.g., a corporation) is a builder as described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances" and the person assigns a purchase and sale agreement for a new house, the person's sale of the interest in the house is subject to the GST/HST whether the sale takes place in the course of a business, an adventure or concern in the nature of trade, or otherwise.
Assignment of a purchase and sale agreement by an individual
If an individual enters into a purchase and sale agreement for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the sale of the interest in the house (or the house itself) is normally considered to be made in the course of an adventure or concern in the nature of trade or, depending on all of the surrounding circumstances, in the course of a business. If it is established that an individual is selling an interest in a new house in the course of a business or adventure or concern in the nature of trade, the individual is considered to have entered into the purchase and sale agreement for the primary purpose of selling the house or an interest in the house.
Whether the activity of acquiring an interest in a house, as a result of entering into a purchase and sale agreement, is done in the course of a business or an adventure or concern in the nature of trade is a question of fact. For more information on how to determine whether an activity is done in the course of a business or an adventure or concern in the nature of trade, refer to Appendix C of GST/HST Memorandum 19.5, Land and Associated Real Property .
Factors in determining the primary purpose
All of the relevant factors surrounding entering into a purchase and sale agreement should be considered in determining the primary purpose for a person's acquisition of an interest in a new house.
The following factors may indicate that, for GST/HST purposes, a person entered into a purchase and sale agreement for the primary purpose of selling an interest in the new house or the house itself. The factors are not listed in any particular order and there is no intent to weigh one more heavily than another.
- The person offers to sell their interest in the house or takes other actions to attract buyers before, or while, the house is under construction.
- The person finances the purchase of the house by a short-term mortgage, or an open mortgage that can be paid off without penalty, rather than by a long-term or closed mortgage.
- Financing of the house is beyond the person's means and that person is relying on the increased value and saleability of the house, or an interest in the house, in a rising housing market.
- The person is an individual and their stated intention to occupy the house as a place of residence is not supported by the circumstances of the case. For example, an individual has a family of four and enters into a purchase and sale agreement for a one-bedroom condo unit where they are not contemplating any changes in family circumstances.
- The person's pattern of activity is such that their occupancy of the house does not have the qualities or characteristics of being permanent. For example, the person purchases more than one house at or around the same time. This factor may be given extra weight where the person has previously entered into a purchase and sale agreement for purposes of selling the house or an interest in the house. There are no outward indicators to support a contrary primary intention (i.e., an intention contrary to an intention of resale). For example, an individual is selling a condo unit, one or more of the above factors are present, there are no physical actions or evidence that the individual's primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence, and no evidence that the sale of the condo unit was triggered by some unforeseen event.
In order for the acquisition of an interest in a new house to be for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the intention to sell the house or an interest in it, or to lease the house in the manner described in that section, must have existed at the time of acquiring the interest. Nonetheless, the intention at the time of acquisition may be demonstrated over a period of time.
If an individual acquired an interest in the house for the primary purpose of using it as a place of residence, the person is not considered to be a builder of the type described in this info sheet even if, at a later point in time, the person sells the house or an interest in the house. However, the person may still be a builder if the person meets one of the other definitions of that term as described in GST/HST Memorandum 19.2.
The following examples illustrate when a person may or may not be a builder of a new house.
Sarah, Francine, and Angela are roommates renting a three-bedroom house. They entered into a purchase and sale agreement with a builder in January 2010 for a one-bedroom condo unit in a new condominium complex that was to be built. The purchase price under the agreement was $300,000 and the closing date was July 31, 2013.
In March 2011, the fair market value of the new condo unit had increased by 50%. They entertained several offers for the sale of their interest in the condo unit before assigning it to James. No individual had occupied the condo unit as a place of residence or lodging when they sold their interest in the unit. They split the proceeds, which they each used as a down payment to buy their own homes.
As it would not be practical for the three individuals to live in the condo unit together, they considered several offers for their interest in the unit, and there are no indicators to support a contrary intention, Sarah, Francine and Angela are considered to have acquired their interest in the condo unit for the primary purpose of selling the unit or an interest in it. The sale is considered to be made in the course of a business or adventure or concern in the nature of trade. Accordingly, Sarah, Francine, and Angela are all builders of the condo unit for GST/HST purposes. As they are builders of the unit and the sale of their interest in the unit is not exempt, GST/HST applies to the sale of each of their interests.
Pascal and Chantal own a four-bedroom house where they live with their three children. This is the only home they have ever owned and lived in. They have never purchased any other real property.
In June 2009, they entered into a purchase and sale agreement with a builder for a 1-bedroom condo unit in a new high-rise condominium complex that was to be built. The purchase price under the agreement was $275,000 and the closing date was June 30, 2010. In May 2010, they sold their interest in the new condo unit for $400,000 before it had been occupied by any individual as a place of residence or lodging. They used the sale proceeds to build an addition to their current home.
Although Pascal and Chantal have no history of buying and selling real property, it would not be practical for their family of five to occupy the condo unit as their place of residence. Lacking evidence to support a contrary intention, their primary purpose in acquiring the interest in the condo unit is considered to be for the purpose of selling the condo unit or an interest in it in the course of a business or an adventure or concern in the nature of trade. Accordingly, they are builders of the new condo unit for GST/HST purposes. As the sale of their interest in the unit is not exempt, GST/HST applies to the sale of their interest.
Eric and Gina owned a 3-bedroom house where they lived with their 3 children. They entered into a purchase and sale agreement with a builder in October 2010 to purchase a new 4-bedroom house that was to be built. They intended to use the new house as their primary place of residence as it was located much closer to the children's school and to Eric and Gina's workplaces and had more space. The closing date is July 31, 2011.
Eric and Gina sold their current home in January 2011 and moved into a rented home they planned to live in until their new house was ready. However, in June 2011, Gina's mother became ill and moved in with them as she was no longer able to live on her own.
Eric and Gina decided that the new house would no longer be large enough and that they would now need a house with a granny suite. They sold their interest in the new 4-bedroom house so that they could buy a bigger home that would suit their changed needs.
Eric and Gina's sale of their original home and temporary move to a rented house during the construction of the new home and their choice to purchase a home located closer to school and work support that their intention in acquiring the interest in the new house was to use the house as their primary place of residence. Given this, and the fact that their only reason for selling the interest was due to a change in personal circumstance (i.e., the new house would no longer accommodate their family's needs), they are not considered to have acquired the interest in the house for the primary purpose of selling it. Accordingly, they are not builders of the new house for GST/HST purposes and the sale of their interest in the house is exempt.
Cindy entered into a purchase and sale agreement with a builder in November 2010 for a new house that was to be built. She intended to use the house as her primary place of residence. Her new home would be located within walking distance from her workplace and would be closer to her family than the apartment she is currently renting. The closing date for the purchase is September 30, 2011.
In July 2011, Cindy's employer announced that it was relocating to another city located three hours away. To keep her current job, Cindy had to move to that city. She sold her interest in the house to John.
Since Cindy had intended to use the house as her primary place of residence and her only reason for selling her interest in the house was due to work relocation, she did not acquire the interest in the house for the primary purpose of selling it. Therefore she is not a builder of the house for GST/HST purposes and the sale of her interest in the house is exempt.
The consideration charged for the sale of an interest in a house generally includes amounts that a person paid to a builder (e.g., a deposit) and that the person wants to recover when assigning their interest in the house. The sale price for the interest may also include a profit, i.e., an amount over and above amounts the person had paid to the builder. If a person's sale of their interest to an assignee purchaser is taxable, the total amount payable for the sale of the interest is subject to GST/HST, including any amount the person paid as a deposit to the builder, whether or not such an amount is separately identified.
A first purchaser enters into a purchase and sale agreement for a new house with a builder (Builder A) and pays a deposit of $10,000 at that time. The first purchaser does not make any further payments to Builder A. The first purchaser subsequently assigns the agreement to an assignee purchaser for $15,000. If the sale of the interest in the house from the first purchaser to the assignee purchaser is subject to GST/HST, tax applies to the full $15,000. This is the case even if the assignment agreement identifies that the $10,000 is a recovery of the deposit that the first purchaser paid to Builder A.
The assignment of a purchase and sale agreement for a new house may be subject to the approval of the builder with whom the first purchaser originally entered into the agreement to construct and sell the new house. The agreement may list conditions related to the first purchaser's right to assign the agreement to an assignee purchaser and, in many cases, the builder charges a fee to the first purchaser for the assignment of the agreement to another person.
The fee charged by the builder in such circumstances is generally subject to the GST/HST.
Eligibility for a GST/HST new housing rebate and provincial new housing rebate (where applicable) where a purchase and sale agreement is assigned
The GST/HST new housing rebate, and where applicable, a provincial new housing rebate, may be available for a new house purchased from a builder and for owner-built new housing. Guide RC4028, GST/HST New Housing Rebate , sets out the eligibility criteria for both types of GST/HST new housing rebates and provincial new housing rebates.
If the first purchaser (the assignor) makes a taxable sale of an interest in a house, i.e., the first purchaser is a builder and assigns the purchase and sale agreement to an assignee purchaser, the first purchaser would not be eligible for either a GST/HST new housing rebate or provincial new housing rebate as they did not acquire the house for use as their primary place of residence. Even if the sale of the interest in the house by the first purchaser is not subject to GST/HST (i.e., in situations where the first purchaser is not a builder of the house), the first purchaser would generally not be eligible for either a GST/HST new housing rebate or a provincial new housing rebate as the conditions for claiming the rebates are not met (e.g., ownership of the house would not transfer to the first purchaser, but to the assignee purchaser).
The assignee purchaser, if an individual, may be eligible for a GST/HST new housing rebate, and where applicable a provincial new housing rebate, where the assignee purchaser receives an assignment of a purchase and sale agreement for a new house. The assignee purchaser would have to meet the eligibility conditions for the rebates as set out in Guide RC4028.
Where a purchase and sale agreement for a new house is assigned, there may be two builders of the house – the original builder (Builder A) and the first purchaser (the assignor). If that is the case, an assignee purchaser would generally have to pay the GST/HST to Builder A for the purchase of the new house and to the first purchaser for the purchase of the interest in the new house.
Claiming a GST/HST new housing rebate when there is more than one builder
In some cases, the builder of a new house pays or credits the amount of the GST/HST new housing rebate, and where applicable, a provincial new housing rebate, to the purchaser of the house. In this case, the builder credits the amount of the new housing rebates to the purchaser by reducing the total amount payable for the purchase of the house by the amount of the expected rebates.
Where this happens, the purchaser and the builder have to sign Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder , and the builder has to send the form to the Canada Revenue Agency (CRA). As the purchaser receives the amount of the rebate from the builder, the builder may claim the amount as a credit against its net tax when it files its GST/HST return.
Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house.
In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.
This info sheet does not replace the law found in the Excise Tax Act (the Act) and its regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA GST/HST rulings office for additional information. A ruling should be requested for certainty in respect of any particular GST/HST matter. Pamphlet RC4405, GST/HST Rulings – Experts in GST/HST Legislation explains how to obtain a ruling and lists the GST/HST rulings offices. If you wish to make a technical enquiry on the GST/HST by telephone, please call 1-800-959-8287.
Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, you may refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .
If you are located in Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please contact Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec Web site to obtain general information.
All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech .
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Articles & Resources
Assignment of Agreement of Purchase and Sale
An Assignment of an Agreement of Purchase and Sale is when an original purchaser under an Agreement of Purchase and Sale permits a different party to take over the contract. New homes, condominiums and even re-sale properties can be assigned.
Purchasers usually assign their Agreement of Purchase and Sale with the view of making a profit.
For example, if the original purchaser signed the Agreement of Purchase and Sale at $100,000.00 but they are now transferring the contract to the third party for $150,000.00 they have profited $50,000.00.
- Keep in mind, when a purchaser signs the contract, closing may not take place for another year or longer;
- They no longer want the home (i.e. they’ve found something better);
Does this mean that the original purchaser walks away free after the Assignment Agreement has been signed? No.
Most, if not all, Assignment agreements will have a clause to the effect of “(original) buyer assumes continuing liability for the “covenants, agreements and obligations” contained the original agreement”
What is the benefit to the new buyer?
- The new buyer may be able to buy into a desirable neighborhood at a time when there are no more units available to be purchased directly from the builder;
- Even taking the original buyer’s profit into account, the assignment may give the new buyer a price advantage over other properties that are currently on the market; and
- Depending on the timing of the assignment, the new buyer may be positioned to choose finishes and make minor changes to the yet-to-be-built home.
Assignor: Original Buyer
Assignee: New Buyer
Consent: Permission from the Builder to transfer the contract to the Assignee. Absolutely Necessary.
Can an Agreement of Purchase and Sale be assigned?
Most Agreement of Purchase and Sales state that the Agreement of Purchase and Sale cannot be assigned without the Vendor’s consent which may be withheld arbitrarily. What this means is that the Builder has the ability to deny any requests for assigning the APS at its sole discretion.
However, at times, the Assignor may have already signed an Amendment to the Agreement of Purchase and Sale permitting one Assignment of the APS. In these circumstances, there may be little to no barrier in assigning the APS. In any event, reference will still need to be made to the APS to make sure that there are no conditions to an assignment [i.e. 90% of units have to be sold (if condo) before an Assignment will be permitted].
Responsibility to Obtain Consent:
Clause 15 in the Assignment of Agreement of Purchase and Sale sets out that the responsibility to obtain consent remains with the Assignor and all costs are to be paid for by him/her. However, costs can be split by modifying Schedule A.
“ The Assignee acknowledges and agrees that the Developer’s Agreement contains a provision prohibiting the purchase and the sale of the within unit without the Developer’s consent and accordingly the Assignee and Assignor shall execute and deliver to the Developer Consent documents as required. This Agreement of Purchase and Sale shall be conditional upon the Assignor obtaining the written consent of the Developer to the assignment herein until XYZ date, failing which the Agreement herein shall be null and void and all deposits returned to the Assignee, unless otherwise extended in writing by the Assignee and Assignor ”
Note: While there will be an Assignment of Agreement of Purchase and Sale to be executed between the Assignor and Assignee, the Vendor will also draft their own consent to assign which will contain their terms and conditions.
Who is responsible for paying additional costs arising in the Statement of Adjustments? Very important to advise client accordingly depending on if Assignor or Assignee.
If we are acting for an Assignor, we want to make sure that there are no clauses in Schedule A or any other Schedule which makes them responsible for adjustments.
Keep in mind, we will not know what the actual adjustments are until well after the Assignment Agreement has been signed. At times, these costs can be significant (i.e. increase in development charges).
At all times, it is the responsibility of the Assignor and Assignee to be diligent in ensuring that they are aware of what’s being contracted for.
Please note the content on this web site is provided for general information purposes only and does not constitute legal or other professional advice of any kind.