If you’ve purchased a new condo or are in the market to do so, you may have heard the term “assignment sale” and wondered what assignment sales are and how they work. Today, we’re breaking down everything you need to know about assignment sales.
What are assignment sales?
Assignment sales are a type of sale in which a buyer (assignor) sells their condo contract to a buyer (assignee) before the closing (move-in) date. Assignment sales occur for both homes and condos, however are most prevalent in pre-construction condos.
Why do people sell before their closing date?
When purchasing a pre-construction condo in Toronto, there can be a long wait time between the point of purchasing and the actual move-in date. It can sometimes take years before a condo is built and a buyer can move in. During that time, circumstances may change for the buyer. For example, the buyer may have accepted a job offer in another city, they may have gotten married and had kids and need a bigger space, or they may not be able to afford closing anymore. Another reason could be that the buyer bought the condo in an up-and-coming area and is now looking to make a profit on the sale. There are many reasons why a person may want to sell their pre-construction condo to another interested buyer.
How do assignment sales work?
Assignment sales can work in different ways depending on the builder. Some builders don’t permit assignments or allow them only if they are paid an assignment fee. So having the builder’s approval is the first essential step to proceeding with an assignment.
When a buyer makes an assignment sale, what they’re actually selling is the condo contract – not the condo itself, since they don’t actually own it yet (since it hasn’t been closed). They are passing along their contractual agreement with the builder to purchase the home – their right and their obligation.
The buyer purchases this right and obligation, and must abide by all the terms within the original contract with the builder, who is the original seller. The original buyer must sign an Agreement of Purchase and Sale, including an Assignment Agreement Clause.
The pros and cons of assignment sales
To break it down quickly, here are some of the main pros and cons of assignments.
- Buyers (assignees) can purchase a brand new condo at a lower price
- The condo’s price/value will likely continue to rise as it’s being constructed
- Buyers can get into an amazing building that sold out
- Buyers benefit from all the perks of the original agreement, such as having their new condo be covered by the Tarion warranty program, which offers years of warranty against errors and defects with the condo unit, as well as provides warranties for newly-installed appliances; the original agreement may also include upgrades, credits, and capped developing charges from the builder
- The builder must approve the transaction before it can go ahead
- There’s less ability to negotiate the price of the home, or the terms and conditions of the agreement, since buyers are inheriting the original purchaser’s contract
- Buyers (assignees) will be responsible for closing costs, which can sometimes include the education and development levies, Tarion legal fees, and HST on appliances
- Buyers will also be responsible for paying land transfer tax, municipal levies, legal fees and more
When buying a new home in Toronto or any other urban area, many of the options on the market are either townhomes or condos. These two types of housing often elicit many questions from potential homeowners and bring up many points of confusion, especially when it comes to homeownership and shared/communal spaces. This blog post will break down the differences between townhomes and condos and will help you determine which one is best for you and your family.
First things first. Most people understand that townhomes (or townhouses) are individual houses that are built side by side, with one or two walls of each home being shared with the home next to it, whereas condos are a type of home that are often an apartment within a larger complex or building (although they can take other forms, including townhomes!).
Here are some important differences between these two types of home:
With a condo, you own the interior of the residence (your unit) only. Exterior parts of the residence, such as the building itself and the outdoor grounds, as well as communal areas such as gyms, party rooms, and rooftop BBQ areas, are owned by the condo association. Condo associations represent the condo owners and their interests. They’re run and funded by the condo residents and also have boards of directors. The role of the boards is to organize regular meetings, establish and maintain budgets, and enforce rules and regulations relating to the condo. If you’re a condo owner, you, therefore, are a joint owner of the communal and common areas. This means you will have to pay a monthly fee.
New townhomes in Toronto can be either freehold or condominium. If they’re freehold (like our upcoming Bartley Towns community of new luxurious townhomes at Eglinton and the DVP), that means that you fully own the house and also the land on which it is built, as well as any yard or deck surrounding it (similarly to how homeowners of detached homes own their homes and yards outright). Freehold townhomes do not have any monthly maintenance fees.
Condominium townhomes, by contrast, do not include land ownership. Similar to the condo apartments discussed above, residents only own the interior of their home, and the land on which the home is built – as well as the common areas surrounding it, if applicable – are jointly owned amongst all owners. This ownership is again managed through a condo association and involves a monthly fee.
Condos are governed by legal statutes, whereas townhomes are not. This means that condo owners have less autonomy since they’re subject to the bylaws outlined by the condo corporation. Residents may not be able to make changes to their homes and may face restrictions regarding the type of exterior decorations they’re allowed to put up, whether or not pets are allowed, rules regarding common areas’ use and open hours, garbage and recycling rules, and also whether or not they’re allowed to rent out their home.
By contrast, owners of freehold townhomes are entirely free to do whatever they like with their homes.
Condo owners generally experience a lower level of privacy, especially condo apartments, since they live in close quarters with many other residents and share communal entrances and exits. Owners of new townhomes in Toronto, especially freehold townhomes, are more likely to have a greater sense of autonomy, privacy, and independence.
A Summary of the Main Differences
To recap: condo owners only own the inside of their homes, and they’re joint owners of the building’s exterior and communal areas. Townhome owners may have the same situation if the townhome is a condo. For freehold townhomes, however, residents fully own their house and also the land it’s built on and the surrounding yard or deck. Freehold townhomes do not have maintenance fees, while condos do. Condos are governed by legal statutes, whereas townhomes aren’t. This means that owners of freehold townhomes have more autonomy. Lastly, people who live in freehold townhomes generally experience a greater degree of privacy and independence.
Questions? Get in touch by sending us a direct message on social media (Facebook, Twitter, or Instagram) or contact us at 905-532-0435. And make sure to register for our upcoming Bartley Towns community if you’ve decided that townhome living is right for you!
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