The A-to-Z Guide to Buying a Condo Assignment in Toronto, Ontario
Thinking of investing in an assignment condo? Today, the condo assignment team at Envision Realty will help you take that first step by taking you through a comprehensive real estate buying guide. By the end, you will be familiar with the terminology, costs, HST rebates, and process of purchasing a condo assignment.
Before we really jump into things, let’s take a look at some of the basic terms of a condo assignment sale, because they differ from a standard real estate transaction.
Builder
The person/company who puts in the money and time to build the Condos. Major downtown toronto condo builders include Tridel, Daniels, Pinnacle International, Alterra, and Great Gulf.
Assignor
The person who originally purchased the condo as a preconstruction from the builder, and is the original buyer of the unit. Now they are selling their condo before completion and registration.
Assignee
The person who is willing to invest in the condo assignment. They are purchasing the contract from the Assignor.
Original Price
The original price is the price originally paid by the Assignor to the Builder for the preconstruction condo.
Condo Assignment
This is a condo that is purchased by an owner in the preconstruction stage but now it is being sold to a new owner before the building is complete.
Condo Assignment Listing Price
The price the Assignor is requesting a potential Assignee to pay for their condo assignment deal.
Deposit
A deposit is an amount that is paid by the Assignor to the Builder initially as a deposit to purchase their preconstruction condo. The condo deposit structure typically follows a series of steps upon time-based or condo-development based milestones that are unique to each deal.
With the assignment agreement of purchase and sale, the Assignee pays back the deposit that the Assignor paid to the builder. It can differ, but the typical deposit required for Toronto condos is usually 15% of the original purchase price.
Occupancy Closing:
When the builder allows the assignee to take possession of the unit. During the occupancy period the builder is still the official owner of the condo unit.
Occupancy Fee:
The builder charges the assignee a Monthly Occupancy fee based on the current interest rate, maintenance fee and property tax portion. The assignee is responsible to pay the occupancy fee until the final closing / registration date.
Occupancy Deposit
An amount that is agreed upon in the Builder’s agreement. This amount is paid by Assignee when they begin to occupy the assigned condo unit. This is usually 5% of the original purchase price.
Capped Development Charges or Levies
Development charges are issued to a builder from their city when the developer receives their building permit. These charges are paid by the developer to fund infrastructure including roads, libraries, parks, education, and more. Each city’s specific charges are different, because they pay for municipal construction and development. The main development charges are general levies, Education levies, Section 37 levies, and Green Standard levies.
Final Closing or Registration
This is the date that the title of the condo units are transferred to the individual unit owners. At this time, the unit owners can make a corporation to register their condominium building.
Let’s take a look at a simple example of how an assignment purchase and calculation works:
Mr. Smith (Assignor) is selling the pre-construction condo unit that he purchased from a builder three years ago, as an assignment to Mrs. Williams (Assignee). The Assignor purchased the unit from builder for $300,000. After three years of appreciation now he is selling the assignment condo to the Assignee for $500,000. The Assignor has already paid a deposit of $45,000 which is a total of 15% of the original purchase price to the builder and there is an additional deposit of 5% of the original purchase price that should be paid to the builder at the occupancy date. Here is the calculation:
The payment of $245,000 owed by the Assignee to Assignor can be paid in installments or through a mortgage. Here are few scenarios on the assignment payment
Scenario -1
Assignee pays a total deposit of $45,000 + Profit $200,000 to the Assignor once the builder gives consent. In this case the Assignee is putting $245,000 toward the down payment. Then the assignee can get a mortgage in the amount of $255,000 from the bank at the final closing.
Scenario -2
Assignee pays the Assignor only the Deposit of $45,000 with builder’s consent. The remaining profit of $200,000 will be paid to the Assignor at the final closing. With this option the Assignee has flexibility to pay less money upfront and pay the profit through the mortgage.
Scenario -3
Assignee pays the down payment that is a total Deposit of $45,000 and a portion of the profit based on an agreement with the Assignor with the builder’s consent. The remaining balance can be paid to the Assignor through mortgage at the final closing.
Once $200,000 is paid by the Assignee to the Assignor and the builder gives consent for the assignment agreement, then the transaction is completed between the Assignee and the Assignor.
Here is the breakdown of the amount that Assignee owes to Builder at the final closing
Mortgage payments depend upon the down payment that is being paid to the Builder.
For Mortgage Payment, use the following link
Land Transfer Tax
A Land Transfer tax is also charged by the government and it is different for Toronto as compared to other areas.
For Toronto, Assignee has to pay both Provincial and Municipal tax.
For other areas, the Assignee only has to pay a Municipal tax.
Regular Buyer Land Transfer Tax
First Time Buyer Land Transfer Tax
If you are a first-time buyer you will get an HST rebate on your condo.
In this example, you will get an HST rebate of $8475 if you are a first-time buyer.
For Mortgage Payment, use the following link
HST - Harmonized Sales Tax
Once an Assignee buys the condo assignment, he has to pay for the HST. Harmonized Sales Tax (HST) is a consumption tax in Canada. The Assignee can get a rebate on this HST charge.
In this example, the assignee pays $22,243
HST is paid by the Assignee at the final closing.
a) If the buyer is the principal resident they will get the rebate within 6 months.
b) If the buyer rents the condo then it must be rented for the first time. The rental agreement must be a minimum 1-year lease and should be between the Assignee and the Tenant.
For HST Calculation, use the following link
Closing Costs for Assignment
1. Land Transfer Tax (Different for the first time or repeat buyer)
2. Lawyer Fees
3. Development Levies
4. HST
If we keep following the above example, then the following would be closing costs incurred by Assignee.
With so many little details, calculations and rules, we understand if you’re a bit overwhelmed! Assignment sales are very complex, but you can find amazing deals if you play your cards right. Envision Realty and Broker of Record Salar Taba specializes in assignment sales, and can help you find the best deal in your dream neighbourhood or condo building.
Trust the experts of assignments and other real estate in Downtown Toronto, Leslieville, Dundas, Danforth, Regent Park, The Beaches and Riverdale to help you make the most of your money.
Contact us via email at: info@envisionrealty.ca or phone us at: 416.465.8888