What is an assignment
When you buy a pre-construction condo, you sign an Agreement of Purchase and Sale (APS) with the builder. The APS is a contract, not a deed — until final closing, you don't own the unit. You own the right to buy it under those contractual terms.
An assignment is the transfer of that contractual right to a new buyer. The new buyer steps into your shoes for final closing. The unit closes with the builder once, in the assignee's name.
Assignments became more common during the 2019–2022 pre-construction wave as buyers tried to monetize paper gains before closing. CRA noticed.
Builder consent and assignment fees
Almost every pre-construction APS requires the builder's consent for assignment. Some builders allow it freely after a milestone (e.g. after a certain percentage of building sold); some restrict it heavily; some prohibit it until after final closing.
Common builder assignment fee: $5,000 to $15,000, sometimes plus a percentage of the assignment profit. Some builders also restrict marketing (no MLS listing) and require all communication through the builder.
Read the APS BEFORE you sign — assignment rights are a material term and vary widely.
The CRA flip — assignment profit may be ordinary income
This is the big change. Historically, profit on assignment was sometimes claimed as capital gain (50% inclusion rate). CRA has been increasingly assessing assignment profits as business income (100% inclusion) or as income from an "adventure in the nature of trade".
The assessment depends on facts and circumstances: intent at time of purchase, frequency of similar transactions, whether the unit was occupied. A clear-cut "I bought to live in it; circumstances changed" can still be capital gains. A flip-and-repeat pattern is increasingly treated as ordinary income.
Effective May 7, 2022, CRA also began applying GST/HST on assignments of new residential housing — the assignor must collect HST on the assignment portion of the price (some carve-outs for deposit reimbursement). This is separate from the income-tax characterization.
Speak to your accountant before assigning. The tax exposure can be very different from what assignors assume.
How the deposit and price work
The assignment price is what the assignee pays the assignor. It typically breaks into:
- Reimbursement of deposits the assignor has paid the builder (15–20% of original price).
- Profit / loss — the spread between assignment price and original price.
The assignee then takes over the remaining builder payments and the obligation to close. On final closing day, the assignee pays the builder the balance under the original APS terms.
Example: Original price $700K, $140K in deposits paid. Assignment at $800K. Assignee pays the assignor $240K (deposit reimbursement $140K + $100K profit) and continues with the remaining $560K obligation to the builder at final closing. The assignee's effective entry price is $800K (everything they pay in total).
The HST flip on the assignment
Post-May 2022 CRA rules require HST on the "profit" portion of an assignment of new residential housing — the assignor collects and remits. Whether deposit reimbursement is HST-exempt depends on careful structuring (whether the deposit is segregated as a "consideration for the assignment" or a "reimbursement"). The CRA has guidance documents; a real estate lawyer with assignment experience is essential.
Separately, the assignee may qualify for the New Housing HST Rebate at final closing (if it's their principal residence) or the New Residential Rental Property Rebate (if rented out).
This is the single most under-appreciated complexity in assignments. A "$100K profit" can become $87K after HST + accountant fees + builder fee. Run the math.
Whether to buy or sell an assignment
Buying an assignment can make sense when: the building is desirable, you want a brand-new unit, you can't wait the additional time for a new launch, and the price (after assignment premium) compares favourably to comparable resale.
Selling an assignment can make sense when: your life has changed, you no longer want to close (job relocation, divorce, financial change), the market has moved and you want to crystallize a gain. Selling an assignment is increasingly a tax event — know the bill before signing.
Either side: get the right lawyer. Assignments are not standard real estate transactions and standard residential lawyers sometimes miss things.
Frequently asked questions
Is the assignment profit a capital gain or business income?
It depends on facts. CRA has signalled increasing willingness to treat assignment profits as business income (100% inclusion). Capital gains treatment (50%) is harder to defend than it used to be. Talk to your accountant before assigning.
Does the assignee need to qualify for a mortgage now or at final closing?
At final closing. The assignee's mortgage approval is the assignee's responsibility. Most builder APSs require evidence of financing capability when consenting to the assignment.
Can I assign before I've paid my full deposit ladder?
Possibly — depends on the APS. Many builders require all deposits paid up to the assignment date.
What if the builder won't consent?
You're stuck with the unit until final closing. After final closing, you can resell normally as a regular resale property. Some buyers structure short-term rentals or interim arrangements to bridge the gap.
Talk to a Toronto Condo Broker
I'm Scott — a licensed Broker at Central Home Realty Inc., Brokerage, focused on the Toronto downtown condo market. If you have a question about anything you read here, send me a note. I read every message myself.