- Keep in mind, when a purchaser signs the contract, closing may not take place for another year or longer;
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.
Common Terms
Assignor: Original Buyer
Assignee: New Buyer
Vendor: Builder
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.
Adjustments
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.
