Author: Supriya Chadha

Assignment agreements are suddenly gaining spotlight in the real estate market nowadays. The reasons can be many including but not limited to ever-inflating house prices, lack of houses available for sale, financial difficulties or instabilities caused by the covid.

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. The assignee is the one who ultimately completes the deal with the seller.

When 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). The assignment of contractual rights is expressly permitted under s. 53(1) of the Conveyancing and Law of Property Act. The law on assignments of contracts applies to the assignment of an agreement of purchase and sale for real property, and the case law confirms that a purchaser can assign an agreement of purchase and sale unless it contains a clause stating that it cannot be assigned or cannot be assigned without the vendor’s approval. Builders typically insert a clause in their new home contracts prohibiting them from being assigned without the builder’s express written consent, which can be unreasonably withheld or refused. If the Builder approves the assignment sale, the Assignor sells their interest, also known as their Agreement of Purchase and Sale (APS), in a preconstruction property and the Assignee becomes the new owner of the unit. Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee.

Even though the original buyer i.e., the Assignor, has completely transferred his or her right to buy the property to the new buyer, i.e., the Assignee, the Assignor is, under the terms of the Assignment Document, still liable to the Vendor under the contract if the new buyer does not complete the transaction with the builder. The continuing liability of the assignor under the Assignment Agreement is something which should be given a careful consideration keeping in mind the rewards and the risks involved.

If you are either assigning your rights as assignor or purchasing as an Assignee, be sure to consult with a real estate lawyer having expertise in these types of deals to make sure that your rights are protected and to fully understand the tax implications that these assignment agreements may incur.

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