If the owner of a pre-sale property wishes to sell before the completion date, the pre-sale property is sold off to a new buyer as an assignment.

An assignment is a legal sales transaction in which the Original Purchaser (the "Assignor") of a property sells, or transfers, his or her rights and obligations under the original contract to a new Purchaser (the "Assignee"). An Assignment can take place any time after the original Agreement For Sale between the Developer (the "Vendor") and the Original Purchaser has occurred , but prior to completion of the property.

Following the assignment, the Assignee assumes all of the Assignor's duties and obligations under the original Agreement of Sale. These rights and obligations are stated in the original Agreement of Sale and include such terms as deposits, included items, completion date, and required disclosure statements. Upon completion, the Assignee is granted the title to the real property.

An assignment is legally permitted, unless otherwise expressed in writing. An assignment fee may be charged by the developer and is normally a cost borne by the assignor.

One important detail to remember is that the developer is the legal owner of the interest in the real property until a legal transfer of title has taken place. In all cases, written consent from the developer is required for an assignment transaction.

Legal and tax issues for a nonresident of Canada selling property in Canada

The majority of tax-related issues relating to nonresidents arise when a nonresident is selling a property. Prior to receiving the proceeds of a real estate sale in Canada, it is necessary for nonresidents selling property to obtain a Clearance Certificate from the Canada Customs and Revenue Agency. The current wait for a Certificate is approximately 6-8 weeks. The Canada Customs and Revenue Agency will collect any tax payable on the property before issuing a Clearance Certificate. This also includes any tax payable on the rental income that has not been remitted, capital gains tax, and, if applicable, recapture of a capital cost allowance.

Sellers should contact their accountant or lawyer concerning a Clearance Certificate as soon as they have accepted an offer on their property. Should the completion date be prior to the issuance of the Clearance Certificate, the purchaser's solicitor will require a holdback of between 25 and 50 per cent of the sale price, until the Clearance Certificate is issued.

The information above is intended only as a summary. Make sure to contact your Canadian lawyer or accountant to discuss these issues in greater detail.

To simplify, an example of an assignment transaction is provided below:
Jacquie (the "Assignor") is entering into an agreement to purchase a condo for $200,000 as a Pre-Sale from a developer. As part of the Agreement For Sale, she paid a total deposit of 25 per cent of the total price, or $50,000. Six months later, and prior to completion of the property, Jacquie decides to sell, and thereby transfer, her contractual rights and obligations to an “Assignee” for $28,000.

Dominic, who missed his chance to purchase one of the now-sold-out condos when the developer was pre-selling, wants to purchase Jacquie's rights and obligations for her asking price of $28,000. Dominic pays Jacquie $28,000 plus replacement of her deposit of $50,000, which equals a total of $78,000.

When the building is complete, Dominic will owe the developer the balance of the Agreement For Sale, which is $150,000 (the original price less the original deposit).