Selling an Assignment in BC

Navigating the real estate landscape can be tricky, especially when understanding the complexities of assignments and purchase and sale contracts in BC. With presale homes rising, many buyers consider selling an “Assignment of Contract,” a potentially profitable strategy in which rights and obligations shift from one buyer to another before closing.

This section will cover every aspect – benefits, restrictions, tax implications, and risk assessment – leaving no stone unturned and providing you with essential knowledge that could optimize your real estate ventures.

Documents you need to provide

The essential paperwork

  • Developer's Consent to an Assignment

    Before proceeding with the assignment, the developer must give their consent. Developers in BC commonly have policies and procedures for assignments, and they may impose fees for processing the assignment. Developers typically evaluate the assignee’s financial stability as part of their approval process.

  • Developer's Purchase Agreement

    As the Buyer’s rights in the Contract of Purchase and Sale are being assigned, you must have a copy of the original Purchase Agreement and all the disclosure statements. This is what you are selling. Different developers use different contracts …not the standard BCREA Contract of Purchase and Sale. This means the original Purchase Agreement should be thoroughly reviewed.

  • Developer's Disclosure Statement

    The BCFSA enforces REDMA and ensures that developers provide complete information and deposit protection for all consumers when marketing new developments.

    Developers provide information to consumers through a disclosure statement. The disclosure statement must disclose all “material facts” concerning the development, which are facts that could reasonably be expected to affect the development property’s price, value, or use.

     

  • Amendment(s) to Disclosure Statement

    A developer must file an Amendment to its Disclosure Statement if a material fact has been omitted, changed, or misrepresented. Each purchaser who still needs to complete their purchase must be given a copy of the Amendment.

Hidden Aspects Buyers & Agents Often Miss

Things you might not know about assignments

It’s important to note that these deals can be quite complex, so many agents avoid handling assignments.

Here are some essential things you may not know about assignments:

1. Most developers charge an Assignment Approval Fee. For example, if the fee is 1% of your original purchase price and your condo costs $750,000, you would pay $7,500 to the builder, plus a 5% GST and an administration fee.

2. Assignment sales are generally not allowed to be advertised on public platforms like MLS, Craigslist, Kijiji, or Facebook. This can make it challenging to find another buyer for your assignment. However, being prepared and knowing this in advance can help you feel more in control. It also allows you to explore alternative marketing strategies, enhancing your chances of a successful assignment sale.

3. Developers can withhold consent to assign your contract anytime and for any reason. They typically prefer to approve an assignment if they have sold most of the building, as they can profit from the Assignment Fee and secure a “backup buyer” if the original purchaser fails to close. The original purchaser remains liable if the new buyer cannot close on the property at final occupancy. Generally, you’re only given one opportunity to assign; if the deal falls apart, you don’t get a second chance.

If your Purchase and Sale Agreement allows you to make assignments, understanding these complexities can empower you. It’s crucial to review all the details carefully. This understanding will help you navigate the assignment process more effectively, potentially leading to favourable outcomes.

From our experience, sellers tend to generate more significant profits after the building is registered.

Posts labelled “Selling an Assignment” address common issues unique to selling an assignment, while blogging posts labelled “Selling” provide general advice typical when selling an assignment contract and other residential real estate in BC.

    Frequently asked questions

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    What are the tax implications of assigning a purchase contract?

    When assigning a purchase contract, the profit may be classified as business income, which is fully taxable, or as a capital gain, which is currently taxed at a 50 percent rate.

    What is an assignment?

    An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller.

    What is REDMA?

    The Real Estate Development Marketing Act is British Columbia’s provincial real estate law that regulates the marketing and sales of new development properties and presale condos in British Columbia, Canada. This law applies to presales throughout Greater Vancouver and British Columbia.

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