An assignment is a type of sales transaction. During the sales transaction the original buyer allows another buyer to overtake buyer rights and obligations of the Purchase and Sale Agreement, before closing on the original buyer’s property.
To put it simply an assignment clause enables homebuyers to sell the home before they actually take possession of it. In Ontario, these types of clauses are most common for condos and pre-built properties, as opposed to properties for re-sale.
Assignment serve as a useful tool for both buyers and sellers. When they’re done properly they are legally binding and this allows a passover of the contract to another buyer, thus avoiding breaching the original contract and any legalities associated in doing so.
Experienced Mortgage and Real Estate Professionals & Assignment Clauses
Be cautious, if you’re working with a mortgage professional or real estate agent for the first time, ask questions about assignment clauses. A true professional is obligated to disclose how these clauses work, if they’re present in your legal documents and if they stand to earn from them beyond their usual commission.
Although it’s been a localized issue, last year there were a number of media reports in British Columbia that suggested some realtors were using assignments to increase their commissions without first informing sellers. You can just never be too safe.
The obligations of real estate professionals in Ontario are just this:
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Disclosure obligations where the same broker is working with both the buyer and seller in the same transaction, and the buyers intention is to assign the purchase to another buyer
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Inform the seller in the above case, so that an assignment clause can be included or excluded in the Purchase of Sale Agreement
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Act with fairness, honesty and integrity when dealing with others in a transaction, while protecting your best interest
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If the professional is the seller’s rep, the are expected to help the seller weigh the advantages and disadvantages of the buyer’s assignment clause
Tax Implications
Before participating in an assignment of property or including clauses, consult with a tax specialist to see what tax you might expect to pay on the profits.
How Mortgage Broker Can Protect Both Buyers and Sellers?
As a buyer or selling you should always know what you’re signing. Real estate contract are legally-binding, so you should also be sure to seek out legal advice to have these contracts and clauses explained to you first before signing anything, an AKAL Mortgages broker can help.
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