If you’ve been following the real-estate market in any metropolitan city, you’ve most likely overheard the term ‘assignment’ when talking about buying or selling condos.  What is an assignment?  An assignment is the transfer of one party’s interests in a contract of purchase and sale to a separate outside party.  In layman’s terms, an outside party takes over the position of a contracting party.

A common type of assignment that occurs is with pre-construction condominiums.  A buyer will enter into a contract to purchase a condo with the date of completion being in the future – as the building has not yet been built.  From the time the contract has been entered into up until the time the building has been completed (property registered), the buyer may potentially assign his/her contract to a third party.

If an assignment is simply the transfer of a contract between parties, why have they become such a big deal for investors?  As the real-estate market fluctuates, demand for property increases and decreases respectively.  It is not uncommon for buyer to see significant increases in the value of their pre-construction unit in the time it takes the developer to complete the build.  Conventionally, an assignment may occur when a purchaser is in a financial bind and is unable to complete at the future agreed upon date.  In a bull market, purchasers buy units with the intention to sell upon completion, or assign before completion at a higher price than that of the original contract.

In theory, this may sound very appealing due to the low cost of entry when purchasing a pre-construction unit, however there are numerous factors that need to be taken into consideration.  The market fluctuates and purchasers could easily be caught on the wrong end of the contract where the market value upon completion is lower than their purchase price.  Additionally, there is no universal rule governing assignments and different developers have different fee’s and rules associated with assigning your contract.

Before purchasing a pre-construction unit with the intention to assign or sell upon completion, it is important to seek the advice of a lawyer.  They can help review your contract and point out any important provisions that may work against you if you are looking to assign before completion.

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