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WHAT IS A REAL ESTATE ASSIGNMENT?
A real estate assignment is a transaction where the buyer, otherwise known as the assignor, transfers their legal rights and obligations under the agreement of purchase and sale to the assignee, who will then close the purchase transaction with the seller. During a real estate assignment, there will typically be two closings. The first closing will be between the assignor and the assignee, where the assignor may make a profit, remain whole, or take a loss on the assignment transaction. The second closing will be between the assignee and the builder or seller of the target property, where the assignee pays the remaining balance to the builder or seller for the property. It is important to note that assigning your rights to a third party may have tax implications. As such, it is important to consult an experienced accountant or business lawyer prior to engaging in a real estate assignment transaction.
In our experience, real estate assignments are more common with new-build homes as there is a long gap between the time when the agreement of purchase and sale is signed and when the transaction closes. During this time, the buyer’s financial or personal situation may change, leading to increased motivation to assign the transaction. In other scenarios, the assignor may simply be interested in “flipping” the property for a profit prior to closing. Generally, with new-build properties, the builder will specify in the agreement of purchase and sale if the buyer is entitled to an assignment transaction.
If the builder or seller has included the right to assign in the agreement of purchase and sale, they will typically include a fee to be paid by the buyer (i.e. the assignor) to allow the assignment to occur. The builder or seller may also include other stipulations, such as requiring approval of the prospective assignee or the prohibition on the marketing of the assignment. If you are a buyer in a real estate transaction, it is important to thoroughly review your agreement of purchase and sale to see if it includes the right to assign and if that right comes with any fees or restrictions. It may be possible to negotiate a reduction or complete removal of any assignment fees during the “cooling-off” period in a pre-construction condominium purchase.
If you are looking to assign your real estate transaction to a third party, contact us today to set up a consultation. Our real estate law team has the experience and knowledge to assist you throughout every step of the transaction.
Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.
