Buying an Assignment in BC: What to Check Before You Take Over a Pre-Sale

An assignment lets you buy a pre-sale condo or townhome before it is finished by taking over the original buyer's contract with the developer. It can be a way into a building that is sold out, often closer to completion than a new pre-sale.

But you are not buying a home in the ordinary way. You are buying someone else's contract, with all of its terms. This guide covers the main legal checks for buyers in BC, from developer consent to property transfer tax and GST.

What you are actually buying

In an assignment, the original buyer (the assignor) transfers their rights and obligations under the purchase agreement with the developer to you (the assignee). Typically you pay the assignor two things: a reimbursement of the deposits they have paid, and an extra amount for the right to buy, often called the lift. On completion, you pay the developer the balance of the original purchase price and become the registered owner.

That means the original contract is the heart of the deal. Its price, completion date, deposit schedule, upgrades and terms all become yours. Read it, and every amendment, before you commit. If you are on the selling side, our guide to assigning a pre-sale contract as a seller covers that perspective.

Developer consent and the assignment fee

For strata lots in BC developments, the Real Estate Development Marketing Act sets the framework. Under section 20.3, unless the developer does not allow assignments at all, the purchase agreement must say that it cannot be assigned without the developer's prior consent. Some contracts prohibit assignment entirely, and others add conditions on when or how it can happen.

The developer may also charge an assignment fee under the contract. Who pays it, the assignor or you, is a matter for your negotiation, so make sure the assignment agreement says so. Do not pay the lift or deposit reimbursement until consent is confirmed in writing, or make your payments conditional on it.

Reporting: what the developer must collect from you

Before consenting, the developer must collect prescribed information and records from every proposed party, and keep a copy of the signed assignment agreement. The developer then files that information with the administrator under the Property Transfer Tax Act. The Province calls this the Condo and Strata Assignment Integrity Register (CSAIR).

According to the Province, information collected from individual assignees includes legal name, date of birth, citizenship for those who are not Canadian citizens or permanent residents, SIN or ITN, tax residency, addresses and contact details. The deal terms are reported too, including the assignment fee, the purchase price with upgrades, the lift, and the deposit reimbursement. The Province says the data is used to confirm the right property transfer tax is paid and is shared with the BC Financial Services Authority and the Canada Revenue Agency. Expect to provide this, and make sure the numbers in your paperwork are accurate.

Deposits and money flow

Under section 18 of the Act, deposits a developer receives from a purchaser must be held in trust by a brokerage, lawyer, notary or prescribed person, and can be released only in listed circumstances. Under section 19, a developer can use deposits for the development only if it has a deposit protection contract in place and gives the purchaser notice, so ask whether that applies to your unit. Either way, the deposits the assignor paid were made under the developer's contract, and they are normally credited toward the purchase price on completion.

The money you pay the assignor is different: it goes to a private seller. Paying it through a lawyer's or notary's trust account, with release tied to developer consent and a signed assignment, reduces the risk of paying for a contract you never receive.

Property transfer tax: based on what you paid

Property transfer tax is paid by the buyer when title is registered, under section 2 of the Property Transfer Tax Act. For a strata lot bought before the strata plan is deposited, section 1.4 treats the fair market value, for an arm's length open-market deal, as the total consideration. The Province's guidance confirms that when a contract is assigned before the strata plan is deposited, tax is calculated on the assignee's total payment, including any amount paid for the right to purchase.

If the assignment happens after the strata plan is deposited, the Province says regular fair market value rules apply. Exemption eligibility is also measured against the total amount paid. Our overview of property transfer tax rates and exemptions explains the programs.

GST: assignments of new homes are taxable

Under section 192.1 of the Excise Tax Act, assigning an agreement to buy a new home or condo unit from a builder is treated as a taxable sale, so GST generally applies to the assignment consideration. However, an amount solely reimbursing the original deposit is excluded where the assignment agreement identifies that reimbursement in writing. Have the agreement clearly distinguish the deposit reimbursement from the assignment premium (the lift). The Canada Revenue Agency's info sheet GI-120 adds that the developer's assignment fee is generally taxable, but parts of that info sheet predate this rule. You also become the purchaser from the builder, so GST on the home itself is part of your completion costs.

An individual assignee may qualify for the GST new housing rebate if they meet the criteria, and the CRA says the assignee can apply directly and include tax paid to both the builder and the assignor. Check whether prices in your deal are stated as including or excluding GST.

Other checks before you sign

• Financing. Your lender will likely appraise the unit near completion. If the value comes in low, you cover the gap. See completing a pre-sale condo.
• Completion timing. Confirm the estimated completion date and any outside date in the original contract.
• Disclosure statement. Get the developer's disclosure statement and all amendments, including strata budget and parking or storage allocations.
• Seller's tax issues. The Province notes that assignors may owe BC home flipping tax. That is the seller's obligation, but it is one more reason to have every amount documented.

Considering an assignment? Have the contract reviewed before you pay

Our real estate lawyers can review the original purchase agreement and assignment terms, coordinate developer consent and trust payments, and handle property transfer tax, GST and completion when your home is ready.

Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.