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Assignment Agreement Template

Use our assignment agreement to transfer contractual obligations.

Updated February 1, 2024 Written by Josh Sainsbury | Reviewed by Brooke Davis

An assignment agreement is a legal document that transfers rights, responsibilities, and benefits from one party (the “assignor”) to another (the “assignee”). You can use it to reassign debt, real estate, intellectual property, leases, insurance policies, and government contracts.

What Is an Assignment Agreement?

What to include in an assignment agreement, how to assign a contract, how to write an assignment agreement, assignment agreement sample.

Partnership Interest

An assignment agreement effectively transfers the rights and obligations of a person or entity under an initial contract to another. The original party is the assignor, and the assignee takes on the contract’s duties and benefits.

It’s often a requirement to let the other party in the original deal know the contract is being transferred. It’s essential to create this form thoughtfully, as a poorly written assignment agreement may leave the assignor obligated to certain aspects of the deal.

The most common use of an assignment agreement occurs when the assignor no longer can or wants to continue with a contract. Instead of leaving the initial party or breaking the agreement, the assignor can transfer the contract to another individual or entity.

For example, imagine a small residential trash collection service plans to close its operations. Before it closes, the business brokers a deal to send its accounts to a curbside pickup company providing similar services. After notifying account holders, the latter company continues the service while receiving payment.

Create a thorough assignment agreement by including the following information:

• Effective Date:  The document must indicate when the transfer of rights and obligations occurs.
• Parties:  Include the full name and address of the assignor, assignee, and obligor (if required).
• Assignment:  Provide details that identify the original contract being assigned.
• Third-Party Approval: If the initial contract requires the approval of the obligor, note the date the approval was received.
• Signatures:  Both parties must sign and date the printed assignment contract template once completed. If a notary is required, wait until you are in the presence of the official and present identification before signing. Failure to do so may result in having to redo the assignment contract.

Review the Contract Terms

Carefully review the terms of the existing contract. Some contracts may have specific provisions regarding assignment. Check for any restrictions or requirements related to assigning the contract.

Check for Anti-Assignment Clauses

Some contracts include anti-assignment clauses that prohibit or restrict the ability to assign the contract without the consent of the other party. If there’s such a clause, you may need the consent of the original parties to proceed.

Determine Assignability

Ensure that the contract is assignable. Some contracts, especially those involving personal services or unique skills, may not be assignable without the other party’s agreement.

Get Consent from the Other Party (if Required)

If the contract includes an anti-assignment clause or requires consent for assignment, seek written consent from the other party. This can often be done through a formal amendment to the contract.

Prepare an Assignment Agreement

Draft an assignment agreement that clearly outlines the transfer of rights and obligations from the assignor (the party assigning the contract) to the assignee (the party receiving the assignment). Include details such as the names of the parties, the effective date of the assignment, and the specific rights and obligations being transferred.

Include Original Contract Information

Attach a copy of the original contract or reference its key terms in the assignment agreement. This helps in clearly identifying the contract being assigned.

Execution of the Assignment Agreement

Both the assignor and assignee should sign the assignment agreement. Signatures should be notarized if required by the contract or local laws.

Notice to the Other Party

Provide notice of the assignment to the non-assigning party. This can be done formally through a letter or as specified in the contract.

File the Assignment

File the assignment agreement with the appropriate parties or entities as required. This may include filing with the original contracting party or relevant government authorities.

Communicate with Third Parties

Inform any relevant third parties, such as suppliers, customers, or service providers, about the assignment to ensure a smooth transition.

Keep Copies for Records

Keep copies of the assignment agreement, original contract, and any related communications for your records.

Here’s a list of steps on how to write an assignment agreement:

Step 1 – List the Assignor’s and Assignee’s Details

List all of the pertinent information regarding the parties involved in the transfer. This information includes their full names, addresses, phone numbers, and other relevant contact information.

This step clarifies who’s transferring the initial contract and who will take on its responsibilities.

Step 2 – Provide Original Contract Information

Describing and identifying the contract that is effectively being reassigned is essential. This step avoids any confusion after the transfer has been completed.

Step 3 – State the Consideration

Provide accurate information regarding the amount the assignee pays to assume the contract. This figure should include taxes and any relevant peripheral expenses. If the assignee will pay the consideration over a period, indicate the method and installments.

Step 4 – Provide Any Terms and Conditions

The terms and conditions of any agreement are crucial to a smooth transaction. You must cover issues such as dispute resolution, governing law, obligor approval, and any relevant clauses.

Step 5 – Obtain Signatures

Both parties must sign the agreement to ensure it is legally binding and that they have read and understood the contract. If a notary is required, wait to sign off in their presence.

Related Documents

• Sales and Purchase Agreement : Outlines the terms and conditions of an item sale.
• Business Contract : An agreement in which each party agrees to an exchange, typically involving money, goods, or services.
• Lease/Rental Agreement : A lease agreement is a written document that officially recognizes a legally binding relationship between two parties -- a landlord and a tenant.
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Contract Assignment Agreement

Rating: 4.8 - 105 votes

This Contract Assignment Agreement document is used to transfer rights and responsibilities under an original contract from one Party, known as the Assignor, to another, known as the Assignee. The Assignor who was a Party to the original contract can use this document to assign their rights under the original contract to the Assignee, as well as delegating their duties under the original contract to that Assignee. For example, a nanny who as contracted with a family to watch their children but is no longer able to due to a move could assign their rights and responsibilities under the original service contract to a new childcare provider.

How to use this document

Prior to using this document, the original contract is consulted to be sure that an assignment is not prohibited and that any necessary permissions from the other Party to the original contract, known as the Obligor, have been obtained. Once this has been done, the document can be used. The Agreement contains important information such as the identities of all parties to the Agreement, the expiration date (if any) of the original contract, whether the original contract requires the Obligor's consent before assigning rights and, if so, the form of consent that the Assignor obtained and when, and which state's laws will govern the interpretation of the Agreement.

If the Agreement involves the transfer of land from one Party to another , the document will include information about where the property is located, as well as space for the document to be recorded in the county's official records, and a notary page customized for the land's location so that the document can be notarized.

Once the document has been completed, it is signed, dated, and copies are given to all concerned parties , including the Assignor, the Assignee, and the Obligor. If the Agreement concerns the transfer of land, the Agreement is then notarized and taken to be recorded so that there is an official record that the property was transferred.

Applicable law

The assignment of contracts that involve the provision of services is governed by common law in the " Second Restatement of Contracts " (the "Restatement"). The Restatement is a non-binding authority in all of U.S common law in the area of contracts and commercial transactions. Though the Restatement is non-binding, it is frequently cited by courts in explaining their reasoning in interpreting contractual disputes.

The assignment of contracts for sale of goods is governed by the Uniform Commercial Code (the "UCC") in § 2-209 Modification, Rescission and Waiver .

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• Assignment Clause

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Contract Clauses

• Acceleration Clause
• Arbitration Clause
• Cancellation Clause
• Choice of Law Clause
• Confidentiality Clause
• Consideration Clause
• Definitions Clause
• Dispute Resolution Clause
• Entire Agreement Clause
• Escalation Clause
• Exclusivity Clause
• Exculpatory Clause
• Force Majeure Clause
• Governing Law Clause
• Indemnification Clause
• Indemnity Clause
• Insurance Clause
• Integration Clause
• Merger Clause
• Non-Competition Clause
• Non-Disparagement Clause
• Non-Exclusivity Clause
• Non-Solicitation Clause
• Privacy Clause
• Release Clause
• Severability Clause
• Subordination Clause
• Subrogation Clause
• Survival Clause
• Termination Clause
• Time of Essence Clause

Jump to Section

Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

• Example 1 . A business closing or a change of control occurs
• Example 2 . New services providers taking over existing customer contracts
• Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
• Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival .  Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database,  EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, <  https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database,  EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database,  EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database,  EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database,  EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

• Real estate contracts
• Sales contract
• Asset purchase agreement
• Purchase and sale agreement
• Bill of sale
• Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Assignment of Purchase Agreement

An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. 3 min read updated on September 19, 2022

An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. In this situation, the buyer is the assignor, and the third party is the assignee. Under the agreement, the assignee pays a higher price. This agreement must take place in the time between when the assignor agrees to buy the home, but before the contract closes with the builder.

With this period, the assignor never takes the title of the property. Instead, the title is put in the name of the assignee. This is informally known as "flipping a home." The flipping of a home occurs when:

• The original buyer enters into a purchase contract and assigns the contract to the third party before closing ends.
• The original buyer makes a profit from the sale.

If the sale does not close, the seller will lose time, money, and resources.

Advantages and Disadvantages of an Assignment of Contract

There are several advantages of an assignment of contract. With an assignment of contract, you are not actually flipping a home. Instead, you are flipping the contract, which means you don't have to have the financial backing to purchase the property. Not only do you not close on the property, but you will also not have to pay any closing costs or take on any additional expenses.

For wholesale flippers, using the assignment of contract is a way to save thousands of dollars each month. For example, if the closing costs per property are $1,000, and you "flip" 10 properties, that is a $10,000 savings.

Wholesalers only need to put down the purchase contract deposit amount that will be held in escrow with the title company or with an attorney. The lower the deposit, the lower the risk that will be assessed. Deposits may be as low as $10 or $100 and will be easier to lose if there are any delays or issues.

An assignment of purchase agreement allows the assignee to buy into new and desirable neighborhoods that are no longer available through the builder.

The main disadvantage of an assignment of contract is the risk of not finding a buyer. If a third-party buyer is not found, and you are under contract, you are responsible for completing the contract. Additional responsibilities include the responsibility of:

• Existing liens.
• Property taxes.

In addition, if the financing of the assignee cannot be obtained before the closing, this may cause the assignor to be responsible for the closing costs and the purchase of the property. The assignor may also not be able to get his or her deposits returned.

Obtaining the Builder's Consent

For an assignment of a purchase agreement to be valid, the builder and assignor must first have a valid legal contract in place that shows the assignor is obligated to purchase a home or condominium unit from the builder.

The buyer may limit how the property can be sold, including that the property cannot be listed on the MLS (multiple listings service). If it is, it is seen as a competing with the builder. If the assignor puts the property on the MLS, it will be a breach of contract, and the builder will be entitled to damages or rescission of the contract. The buyer will also be able to retain any deposits that have been paid and any other money paid for upgrades and extras.

The assignor must also clearly state the property is an assignment of an agreement of purchase with the builder and not a direct sale from the assignor.

Preparing an Assignment of Purchase Agreement

When preparing the agreement documentation, there are questions that should be asked to determine responsibility. Some of the questions to be asked are:

• Who will be preparing the documents?
• Who will pay the cost to prepare the documents?
• Will the assignment agreement and written consent of the builder be prepared by the builder's attorney? And will they cover the costs?
• Can terms agreed to by the assignor and builder be negotiated by the assignee? If so, who will cover the costs, and how will they be resolved?

A detail that should also be negotiated is the responsibility of paying the commission of the assignment agreement.

If you need help with an assignment of a purchase agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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AssignToday Blog

10 Essential Things To Know About Real Estate Assignment Sale (For Sellers)

What is an assignment.

As the name implies, an assignment is when the original buyer of a property gives up their rights to that contract and assigns it to another buyer (Assignee). 

An assignment is different from a sale of property because in a sale both parties (the seller and buyer) are involved; and in an assignment, the seller transfers their rights, interest and benefits under their contract to another buyer. The seller can assign their contract before or after closing day.

When does someone need to assign a real estate purchase contract?

When should you assign your contract?

If you are unable to complete the purchase of a property for whatever reason, but would like to move forward with another buyer and give them an opportunity to buy the property at an agreed upon price, then an assignment may be right for you. Some common reasons why someone might need to assign a real estate purchase contract include:

• Financial hardship due to job loss or sudden illness
• Move to different city/ country
• Personal reasons like marriage, children or birth of newborn
• Death or incapacitation of the original buyer
• Loss of financing
• Original buyer looking to sell off to earn profit (speculative buying)

Is it legal to assign a contract?

The short answer is yes, it’s legal to assign contracts. However, there are certain things you need to know about how this process works before you decide whether or not you want to go through with it.

The first thing you should know is that assigning a contract isn’t a casual decision—it’s a legal document. When you sign an assignment agreement, you’re entering into an agreement with another party (the buyer) where they agree to take over your responsibilities under the original contract.

The second thing worth mentioning here is that while assignments aren’t necessarily uncommon occurrences––especially when dealing with multiple parties––they can be tricky because they often involve changing hands during different stages of closing proceedings which can make things unnecessarily complicated sometimes if not done correctly or thoroughly enough beforehand

How do assignments work?

An assignment is a transfer of a seller’s interest in the contract. In other words, it’s when a buyer assigns their rights under a contract to someone else. This can happen before closing or after closing and both scenarios have different implications for the original buyer (the assignor), as well as the new buyer who has taken over their position (the assignee).

Here’s how it works: The assignor transfers his or her interest in the contract to another person—this is known as an “assignment.” In order for this transfer to take place legally, four conditions must be met:

• Both parties must agree on how much money will be exchanged between them;
• Any existing obligations between either party must be transferred over without interruption;
• All future obligations that arise from signing onto this agreement must also be transferred over without disruption;
• And finally, if there are any fees associated with making this switch then those need to be paid

Are there any restrictions on assignments of purchase contracts?

The answer, in a nutshell: No.

The law does not restrict assignments of purchase contracts. In other words, if you want to assign your contract to another buyer or seller, you can do so freely and without penalty—as long as both parties have signed the contract and the sale has closed (or gone into escrow).

Can I assign my purchase contract to anyone?

The answer to this question is a resounding Yes.

You can assign your contract to anyone you like, as long as they meet the seller’s requirements for buyers.

For example, if your purchase contract requires that buyers have good credit and that they put down 20% in earnest money, then only someone who meets these criteria will be able to take over your contract.

So, who might assign their purchase contract? Here are some examples:

• Family members
• Friends (or friends-of-friends)
• Real estate agents (particularly agents who specialize in assignments)

Can the buyer and seller agree to set a price for the contract assignment before it happens?

The answer is Yes, but it’s not necessary or recommended.

The reason is that once an assignment has been documented, there are no further negotiations between the buyer and seller on that contract. So there’s no need for any further discussion about price in advance of closing (unless you want to include some kind of non-binding agreement).

If you want to see what your property might sell for when it comes time to assign your contract, talk with an agent who specializes in negotiating contracts after they have already been signed by both parties.

What happens to deposits paid by the original buyer (the assignor)?

• The deposit is usually returned to the assignor.
• The deposit is sometimes not returned to the assignor (typically if the buyer was a good one)
• The deposit is always returned to the original buyer if that person is still in contract with you and wants to take over as their own private party sale (PPS).

How do I find an end buyer for my property assignment?

There are several ways you can find an end buyer for your property assignment:

• Ask your real estate agent. Your agent should know of buyers interested in purchasing assignments, or at least be able to refer you to someone who can help.
• Ask your real estate lawyer (or real estate broker). Your attorney may also be able to refer you to a buyer’s attorney he or she knows and trusts personally, many lawyers have clients looking for properties like yours all the time
• Submit Your Assignment on Assign Today. Post your property on AssignToday.Com , lot of buyers are looking to take advantage of assignment sale via our website.

If you’re thinking of buying and selling a pre-construction home, you should understand how real estate assignment sales work.

In short: An assignment sale allows buyers who have already put down their deposits on a property to transfer their contract over to another buyer.

This means that while they are still legally obligated to complete the deal, they can make a profit by selling their right to buy the home at its current market value.

The seller will then go ahead with the original sale and collect an additional commission for facilitating this transaction.

While this might sound like an easy way for sellers to make money off of homes that haven’t sold yet (and potentially even get paid twice), there are some things you should keep in mind before taking advantage of real estate assignment sales yourself: you should connect with the Real Estate Professional who specializes in buying and selling preconstruction homes.

Meghna Negi

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Assignment of agreement of purchase and sale.

An Assignment of an Agreement of Purchase and Sale is when an original purchaser under an Agreement of Purchase and Sale permits a different party to take over the contract. New homes, condominiums and even re-sale properties can be assigned.  

Purchasers usually assign their Agreement of Purchase and Sale with the view of making a profit. 

For example, if the original purchaser signed the Agreement of Purchase and Sale at $100,000.00 but they are now transferring the contract to the third party for $150,000.00 they have profited $50,000.00.

Other reasons?

• Keep in mind, when a purchaser signs the contract, closing may not take place for another year or longer;
• They no longer want the home (i.e. they’ve found something better);

Does this mean that the original purchaser walks away free after the Assignment Agreement has been signed? No.

Most, if not all, Assignment agreements will have a clause to the effect of “(original) buyer assumes continuing liability for the “covenants, agreements and obligations” contained the original agreement”

What is the benefit to the new buyer?

• The new buyer may be able to buy into a desirable neighborhood at a time when there are no more units available to be purchased directly from the builder;
• Even taking the original buyer’s profit into account, the assignment may give the new buyer a price advantage over other properties that are currently on the market; and
• Depending on the timing of the assignment, the new buyer may be positioned to choose finishes and make minor changes to the yet-to-be-built home.

Common Terms

Assignor: Original Buyer

Assignee: New Buyer

Vendor: Builder

Consent: Permission from the Builder to transfer the contract to the Assignee. Absolutely Necessary. 

Can an Agreement of Purchase and Sale be assigned?

Most Agreement of Purchase and Sales state that the Agreement of Purchase and Sale cannot be assigned without the Vendor’s consent which may be withheld arbitrarily. What this means is that the Builder has the ability to deny any requests for assigning the APS at its sole discretion. 

However, at times, the Assignor may have already signed an Amendment to the Agreement of Purchase and Sale permitting one Assignment of the APS. In these circumstances, there may be little to no barrier in assigning the APS. In any event, reference will still need to be made to the APS to make sure that there are no conditions to an assignment [i.e. 90% of units have to be sold (if condo) before an Assignment will be permitted]. 

Responsibility to Obtain Consent:

Clause 15 in the Assignment of Agreement of Purchase and Sale sets out that the responsibility to obtain consent remains with the Assignor and all costs are to be paid for by him/her. However, costs can be split by modifying Schedule A.  

“ The Assignee acknowledges and agrees that the Developer’s Agreement contains a provision prohibiting the purchase and the sale of the within unit without the Developer’s consent and accordingly the Assignee and Assignor shall execute and deliver to the Developer Consent documents as required. This Agreement of Purchase and Sale shall be conditional upon the Assignor obtaining the written consent of the Developer to the assignment herein until XYZ date, failing which the Agreement herein shall be null and void and all deposits returned to the Assignee, unless otherwise extended in writing by the Assignee and Assignor ”

Note: While there will be an Assignment of Agreement of Purchase and Sale to be executed between the Assignor and Assignee, the Vendor will also draft their own consent to assign which will contain their terms and conditions. 

Adjustments

Who is responsible for paying additional costs arising in the Statement of Adjustments? Very important to advise client accordingly depending on if Assignor or Assignee. 

If we are acting for an Assignor, we want to make sure that there are no clauses in Schedule A or any other Schedule which makes them responsible for adjustments. 

Keep in mind, we will not know what the actual adjustments are until well after the Assignment Agreement has been signed. At times, these costs can be significant (i.e. increase in development charges). 

At all times, it is the responsibility of the Assignor and Assignee to be diligent in ensuring that they are aware of what’s being contracted for.

Please note the content on this web site is provided for general information purposes only and does not constitute legal or other professional advice of any kind.

Nava Wilson LLP specializes in Real Estate, Immigration, Corporate Law, Litigation, and Wills and Estates.

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Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit

From: Canada Revenue Agency

Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change. For more information about the legislative amendment, refer to  GST/HST Notice 323, Proposed GST/HST Treatment of Assignment Sales .

GST/HST Info Sheet GI-120 July 2011

This info sheet explains how the GST/HST applies to the assignment of a purchase and sale agreement for the construction and sale of a new house.

The term "new house" used in this info sheet refers to a newly constructed or substantially renovated house or condominium unit. A house that has been substantially renovated is generally given the same treatment under the GST/HST as a newly constructed house. Extensive modifications must be made to a previously occupied house in order to meet the definition of a "substantial renovation" for GST/HST purposes. For a full explanation of the factors to consider in deciding if a substantial renovation has taken place, refer to GST/HST Technical Information Bulletin B-092, Substantial Renovations and the GST/HST New Housing Rebate .

In this publication, a house includes a single unit house, a semi detached house, a duplex, a rowhouse unit and a residential condominium unit (condo unit), but does not include a mobile home or floating home.

Where a person enters into a purchase and sale agreement with a builder for the construction and sale of a new house, the person may be entitled to assign their rights and obligations under the agreement to another person (an assignee). Generally, the result of the assignment is that the purchase and sale agreement is then between the builder and the assignee.

This publication addresses the situation where

• a purchaser (referred to as the first purchaser) enters into a purchase and sale agreement with a builder (Builder A) for the construction and sale of a new house, and
• the first purchaser subsequently assigns the agreement to an assignee (referred to as the assignee purchaser) before Builder A transfers possession or ownership of the house to the first purchaser and before any individual has occupied the house as a place of residence or lodging.

Generally, upon entering into an agreement for the construction and sale of a new house, the first purchaser is considered to have acquired an interest in the house. For GST/HST purposes, the assignment of the agreement to the assignee purchaser is normally considered to be a sale of the first purchaser's interest in the new house. The sale of an interest in a new house is generally taxable where the person selling the interest is a builder of the house.

For GST/HST purposes, the term "builder" is specifically defined and is not limited to a person who physically constructs a house. There are several instances in which an individual or other person is a builder for GST/HST purposes. For more information on persons who are included in the definition of "builder", refer to GST/HST Memorandum 19.2, Residential Real Property .

This info sheet addresses only whether a person is a builder as described in the following paragraph.

Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances

A builder includes a person who acquires an interest in a new house before it has been occupied by an individual as a place of residence or lodging for the primary purpose of selling the house or an interest in the house or leasing the house, other than to an individual who is acquiring the house otherwise than in the course of a business or adventure or concern in the nature of trade. When that person is an individual, the individual must acquire the interest in the course of a business or an adventure or concern in the nature of trade in order to be a builder described by this paragraph.

Even if a person is not a builder as described in the preceding paragraph, the person may be a builder based on one of the other definitions of the term as described in GST/HST Memorandum 19.2.

Assignment of a purchase and sale agreement by a person other than an individual

Where a person other than an individual (e.g., a corporation) is a builder as described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances" and the person assigns a purchase and sale agreement for a new house, the person's sale of the interest in the house is subject to the GST/HST whether the sale takes place in the course of a business, an adventure or concern in the nature of trade, or otherwise.

Assignment of a purchase and sale agreement by an individual

If an individual enters into a purchase and sale agreement for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the sale of the interest in the house (or the house itself) is normally considered to be made in the course of an adventure or concern in the nature of trade or, depending on all of the surrounding circumstances, in the course of a business. If it is established that an individual is selling an interest in a new house in the course of a business or adventure or concern in the nature of trade, the individual is considered to have entered into the purchase and sale agreement for the primary purpose of selling the house or an interest in the house.

Whether the activity of acquiring an interest in a house, as a result of entering into a purchase and sale agreement, is done in the course of a business or an adventure or concern in the nature of trade is a question of fact. For more information on how to determine whether an activity is done in the course of a business or an adventure or concern in the nature of trade, refer to Appendix C of GST/HST Memorandum 19.5, Land and Associated Real Property .

Factors in determining the primary purpose

All of the relevant factors surrounding entering into a purchase and sale agreement should be considered in determining the primary purpose for a person's acquisition of an interest in a new house.

The following factors may indicate that, for GST/HST purposes, a person entered into a purchase and sale agreement for the primary purpose of selling an interest in the new house or the house itself. The factors are not listed in any particular order and there is no intent to weigh one more heavily than another.

• The person offers to sell their interest in the house or takes other actions to attract buyers before, or while, the house is under construction.
• The person finances the purchase of the house by a short-term mortgage, or an open mortgage that can be paid off without penalty, rather than by a long-term or closed mortgage.
• Financing of the house is beyond the person's means and that person is relying on the increased value and saleability of the house, or an interest in the house, in a rising housing market.
• The person is an individual and their stated intention to occupy the house as a place of residence is not supported by the circumstances of the case. For example, an individual has a family of four and enters into a purchase and sale agreement for a one-bedroom condo unit where they are not contemplating any changes in family circumstances.
• The person's pattern of activity is such that their occupancy of the house does not have the qualities or characteristics of being permanent. For example, the person purchases more than one house at or around the same time. This factor may be given extra weight where the person has previously entered into a purchase and sale agreement for purposes of selling the house or an interest in the house. There are no outward indicators to support a contrary primary intention (i.e., an intention contrary to an intention of resale). For example, an individual is selling a condo unit, one or more of the above factors are present, there are no physical actions or evidence that the individual's primary intention was to live in the condo unit, use it as a vacation home, or rent it to another individual for use as their place of residence, and no evidence that the sale of the condo unit was triggered by some unforeseen event.

In order for the acquisition of an interest in a new house to be for one of the primary purposes described in the section "Primary purpose: selling the house or an interest in the house or leasing the house in certain circumstances", the intention to sell the house or an interest in it, or to lease the house in the manner described in that section, must have existed at the time of acquiring the interest. Nonetheless, the intention at the time of acquisition may be demonstrated over a period of time.

If an individual acquired an interest in the house for the primary purpose of using it as a place of residence, the person is not considered to be a builder of the type described in this info sheet even if, at a later point in time, the person sells the house or an interest in the house. However, the person may still be a builder if the person meets one of the other definitions of that term as described in GST/HST Memorandum 19.2.

The following examples illustrate when a person may or may not be a builder of a new house.

Sarah, Francine, and Angela are roommates renting a three-bedroom house. They entered into a purchase and sale agreement with a builder in January 2010 for a one-bedroom condo unit in a new condominium complex that was to be built. The purchase price under the agreement was $300,000 and the closing date was July 31, 2013.

In March 2011, the fair market value of the new condo unit had increased by 50%. They entertained several offers for the sale of their interest in the condo unit before assigning it to James. No individual had occupied the condo unit as a place of residence or lodging when they sold their interest in the unit. They split the proceeds, which they each used as a down payment to buy their own homes.

As it would not be practical for the three individuals to live in the condo unit together, they considered several offers for their interest in the unit, and there are no indicators to support a contrary intention, Sarah, Francine and Angela are considered to have acquired their interest in the condo unit for the primary purpose of selling the unit or an interest in it. The sale is considered to be made in the course of a business or adventure or concern in the nature of trade. Accordingly, Sarah, Francine, and Angela are all builders of the condo unit for GST/HST purposes. As they are builders of the unit and the sale of their interest in the unit is not exempt, GST/HST applies to the sale of each of their interests.

Pascal and Chantal own a four-bedroom house where they live with their three children. This is the only home they have ever owned and lived in. They have never purchased any other real property.

In June 2009, they entered into a purchase and sale agreement with a builder for a 1-bedroom condo unit in a new high-rise condominium complex that was to be built. The purchase price under the agreement was $275,000 and the closing date was June 30, 2010. In May 2010, they sold their interest in the new condo unit for $400,000 before it had been occupied by any individual as a place of residence or lodging. They used the sale proceeds to build an addition to their current home.

Although Pascal and Chantal have no history of buying and selling real property, it would not be practical for their family of five to occupy the condo unit as their place of residence. Lacking evidence to support a contrary intention, their primary purpose in acquiring the interest in the condo unit is considered to be for the purpose of selling the condo unit or an interest in it in the course of a business or an adventure or concern in the nature of trade. Accordingly, they are builders of the new condo unit for GST/HST purposes. As the sale of their interest in the unit is not exempt, GST/HST applies to the sale of their interest.

Eric and Gina owned a 3-bedroom house where they lived with their 3 children. They entered into a purchase and sale agreement with a builder in October 2010 to purchase a new 4-bedroom house that was to be built. They intended to use the new house as their primary place of residence as it was located much closer to the children's school and to Eric and Gina's workplaces and had more space. The closing date is July 31, 2011.

Eric and Gina sold their current home in January 2011 and moved into a rented home they planned to live in until their new house was ready. However, in June 2011, Gina's mother became ill and moved in with them as she was no longer able to live on her own.

Eric and Gina decided that the new house would no longer be large enough and that they would now need a house with a granny suite. They sold their interest in the new 4-bedroom house so that they could buy a bigger home that would suit their changed needs.

Eric and Gina's sale of their original home and temporary move to a rented house during the construction of the new home and their choice to purchase a home located closer to school and work support that their intention in acquiring the interest in the new house was to use the house as their primary place of residence. Given this, and the fact that their only reason for selling the interest was due to a change in personal circumstance (i.e., the new house would no longer accommodate their family's needs), they are not considered to have acquired the interest in the house for the primary purpose of selling it. Accordingly, they are not builders of the new house for GST/HST purposes and the sale of their interest in the house is exempt.

Cindy entered into a purchase and sale agreement with a builder in November 2010 for a new house that was to be built. She intended to use the house as her primary place of residence. Her new home would be located within walking distance from her workplace and would be closer to her family than the apartment she is currently renting. The closing date for the purchase is September 30, 2011.

In July 2011, Cindy's employer announced that it was relocating to another city located three hours away. To keep her current job, Cindy had to move to that city. She sold her interest in the house to John.

Since Cindy had intended to use the house as her primary place of residence and her only reason for selling her interest in the house was due to work relocation, she did not acquire the interest in the house for the primary purpose of selling it. Therefore she is not a builder of the house for GST/HST purposes and the sale of her interest in the house is exempt.

Assignment fees

The consideration charged for the sale of an interest in a house generally includes amounts that a person paid to a builder (e.g., a deposit) and that the person wants to recover when assigning their interest in the house. The sale price for the interest may also include a profit, i.e., an amount over and above amounts the person had paid to the builder. If a person's sale of their interest to an assignee purchaser is taxable, the total amount payable for the sale of the interest is subject to GST/HST, including any amount the person paid as a deposit to the builder, whether or not such an amount is separately identified.

A first purchaser enters into a purchase and sale agreement for a new house with a builder (Builder A) and pays a deposit of $10,000 at that time. The first purchaser does not make any further payments to Builder A. The first purchaser subsequently assigns the agreement to an assignee purchaser for $15,000. If the sale of the interest in the house from the first purchaser to the assignee purchaser is subject to GST/HST, tax applies to the full $15,000. This is the case even if the assignment agreement identifies that the $10,000 is a recovery of the deposit that the first purchaser paid to Builder A.

The assignment of a purchase and sale agreement for a new house may be subject to the approval of the builder with whom the first purchaser originally entered into the agreement to construct and sell the new house. The agreement may list conditions related to the first purchaser's right to assign the agreement to an assignee purchaser and, in many cases, the builder charges a fee to the first purchaser for the assignment of the agreement to another person.

The fee charged by the builder in such circumstances is generally subject to the GST/HST.

Eligibility for a GST/HST new housing rebate and provincial new housing rebate (where applicable) where a purchase and sale agreement is assigned

The GST/HST new housing rebate, and where applicable, a provincial new housing rebate, may be available for a new house purchased from a builder and for owner-built new housing. Guide RC4028, GST/HST New Housing Rebate , sets out the eligibility criteria for both types of GST/HST new housing rebates and provincial new housing rebates.

If the first purchaser (the assignor) makes a taxable sale of an interest in a house, i.e., the first purchaser is a builder and assigns the purchase and sale agreement to an assignee purchaser, the first purchaser would not be eligible for either a GST/HST new housing rebate or provincial new housing rebate as they did not acquire the house for use as their primary place of residence. Even if the sale of the interest in the house by the first purchaser is not subject to GST/HST (i.e., in situations where the first purchaser is not a builder of the house), the first purchaser would generally not be eligible for either a GST/HST new housing rebate or a provincial new housing rebate as the conditions for claiming the rebates are not met (e.g., ownership of the house would not transfer to the first purchaser, but to the assignee purchaser).

The assignee purchaser, if an individual, may be eligible for a GST/HST new housing rebate, and where applicable a provincial new housing rebate, where the assignee purchaser receives an assignment of a purchase and sale agreement for a new house. The assignee purchaser would have to meet the eligibility conditions for the rebates as set out in Guide RC4028.

Where a purchase and sale agreement for a new house is assigned, there may be two builders of the house – the original builder (Builder A) and the first purchaser (the assignor). If that is the case, an assignee purchaser would generally have to pay the GST/HST to Builder A for the purchase of the new house and to the first purchaser for the purchase of the interest in the new house.

Claiming a GST/HST new housing rebate when there is more than one builder

In some cases, the builder of a new house pays or credits the amount of the GST/HST new housing rebate, and where applicable, a provincial new housing rebate, to the purchaser of the house. In this case, the builder credits the amount of the new housing rebates to the purchaser by reducing the total amount payable for the purchase of the house by the amount of the expected rebates.

Where this happens, the purchaser and the builder have to sign Form GST190, GST/HST New Housing Rebate Application for Houses Purchased from a Builder , and the builder has to send the form to the Canada Revenue Agency (CRA). As the purchaser receives the amount of the rebate from the builder, the builder may claim the amount as a credit against its net tax when it files its GST/HST return.

Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application through the first purchaser (the assignor), or directly to the CRA, for the tax paid to the first purchaser on the purchase of the interest in the house.

In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.

This info sheet does not replace the law found in the Excise Tax Act (the Act) and its regulations. It is provided for your reference. As it may not completely address your particular operation, you may wish to refer to the Act or appropriate regulation, or contact any CRA GST/HST rulings office for additional information. A ruling should be requested for certainty in respect of any particular GST/HST matter. Pamphlet RC4405, GST/HST Rulings – Experts in GST/HST Legislation explains how to obtain a ruling and lists the GST/HST rulings offices. If you wish to make a technical enquiry on the GST/HST by telephone, please call 1-800-959-8287.

Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, you may refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .

If you are located in Quebec and wish to make a technical enquiry or request a ruling related to the GST/HST, please contact Revenu Québec at 1-800-567-4692. You may also visit the Revenu Québec Web site to obtain general information.

All technical publications related to GST/HST are available on the CRA Web site at www.cra.gc.ca/gsthsttech .

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