All you need to know about contract assignments

Real estate contracts a reassignable under the law unless the home seller includes a clause that expressly forbids it.

Contract assignments have been the focus of attention in today’s real estate market. So what is an assignment? People buy and sell real estate in BC with a document called the Contract of Purchase and Sale. It describes the rights and obligations of the buyer and seller.

An accepted real estate contract, that hasn’t yet completed, has value in a rising market. A contracting party can sell those rights to someone else unless the contract states otherwise. This type of transaction is known as an assignment agreement.

In simple terms, someone can buy the right to step into the original buyer’s shoes to complete the contract.

The person selling the contractual rights is the assignor. The person buying the rights is the assignee. The money the assignee pays for the contract is the assignment fee, often referred to as “the lift.”

Real estate contracts are assignable under the law unless the home seller includes a clause that expressly forbids it.

So what happens if the assignee does not complete the contract? Remember that the original buyer is still obligated to the original seller under the terms of that contract.

What about taxes on an assignment contract?

The Property Transfer Tax (PTT) is triggered when a property is registered in a buyer’s name at the land title office. An assignment does not transfer real estate ownership. It sells rights contained in a contract. Since these rights are not registered at the land title office, the PTT is not payable.

Money made in a business venture is generally taxable and must be reported to the Canada Revenue Agency (CRA) – including an assignment lift.

CRA may treat the l i ft as either a capital gain or business income depending on the circumstances.

GST is not applicable to the lift of an assignment. GST is, however, charged on new or never-before-occupied homes.

Always check with your accountant and lawyer before you agree to an assignment.