Assignment Agreement in Ontario: A Comprehensive Guide
When it comes to real estate transactions, an assignment agreement is an important legal document that should not be overlooked. In Ontario, assignment agreements are commonly used in the purchase and sale of pre-construction condos and townhouses. It allows the initial purchaser (assignor) to transfer the right to purchase the property to a third party (assignee) before the closing date.
What is an Assignment Agreement?
An assignment agreement is a legal document that transfers the rights and obligations of a contract from one party to another. In the context of real estate, it allows the original buyer to sell their interest in the property to another buyer, without ever taking ownership of the property.
How does it work?
Let`s say a buyer purchases a pre-construction condo and signs a contract with the builder. Before the closing date, the buyer decides to sell their interest in the property to a third party without ever having lived in or taken possession of the unit. The buyer (assignor) and the third party (assignee) enter into an assignment agreement where the assignor transfers their rights and obligations under the existing contract to the assignee. The assignee then takes over the contract, pays the remaining balance to the builder on the closing date, and takes ownership of the property.
What are the benefits of an Assignment Agreement?
For the assignor, an assignment agreement can allow them to make a profit on a property they haven`t even taken possession of yet, as the value of the property may appreciate before the closing date. For the assignee, an assignment agreement can allow them to purchase a property that would have been otherwise unavailable because the pre-construction project may have been sold out.
What are the risks of an Assignment Agreement?
It`s essential to note that an assignment agreement may not always be allowed under the original purchase agreement. The builder or developer may have restrictions or fees associated with the assignment of the pre-construction unit. It`s crucial to review the original purchase agreement before entering into an assignment agreement.
Additionally, the assignee will be purchasing the property based on the original purchase agreement, so any changes made to the contract by the original buyer are not guaranteed to be valid. As such, the assignee should conduct their own due diligence before entering into an assignment agreement.
Conclusion
An assignment agreement can be an essential tool for buyers in real estate transactions, especially those involving pre-construction properties. However, it`s crucial to understand the legal implications associated with an assignment agreement in Ontario carefully. If you`re considering entering into an assignment agreement, it`s best to seek the guidance of a real estate lawyer.