What is an assignment?
An assignment simply refers to the transfer of one’s contractual rights and obligations from one person (the “assignor”) to another (the “assignee”). The specific features and terms of an assignment are usually set out in a separate assignment contract, which refers to the rights and obligations in an original contract. As a result, assignments generally involve at least two related contracts: the Original Contract and the Assignment Contract. Often, assignments are seen in the context of long-term obligations, such as commercial leases or agreements to purchase pre-construction properties.
- Are Assignments Permitted?
- Why Would An Assignor Assign Their Interest?
- Why Would An Assignee Prefer An Assignment?
- How Can Assignors And Assignees Protect Themselves?
Are assignments permitted?
Speaking generally, either party to a contract may assign their rights and obligations unless the terms of the said contract suggest otherwise. For instance, in most agreements of purchase and sale for pre-construction property, builders will place strict limits on the purchaser’s rights to assign by requiring the purchaser to obtain the builder’s consent to do so. Going one step further, builders commonly prohibit purchasers from advertising an assignment on any platform.
Even when a builder consents to an assignment, they may impose additional terms and conditions which can be costly and burdensome for a purchaser looking to assign. For example, the builder can refuse to release the original purchaser from their obligations notwithstanding the assignment.
Why would an assignor assign their interest?
Assignments by assignors generally occur for one of two reasons: (1) the assignor intends to make a quick(er) profit by “realizing” or selling their contractual rights before closing with the builder, or (2) the assignor cannot or no longer wishes to meet their obligations under the Original Contract. Assignors who wish to see early returns on their investment hope to take advantage of a seller’s market by assigning their contractual rights to an assignee – for a profit, of course. On the other hand, assignors who cannot or no longer wish to meet their obligations with the builder have usually experienced a change in their circumstances or plans which would make meeting their obligations infeasible.
Why would an assignee prefer an assignment?
Assignments may be attractive to assignees looking to buy into a specific development which has already been completely sold but not closed. Those looking to invest may yet make substantial gains (on final closing with the builder) if the market is on the rise – even if the assignee ends up paying the assignor’s fee in addition to the builder’s sale price. Also, because of the builder’s restrictions on advertising assignments and perhaps because of a general unfamiliarity with assignments among the public, it may be less likely that assignments are the subject of bidding wars.
How can assignors and assignees protect themselves?
The concerns of assignors and assignees vary greatly from situation to situation, so seeking the advice of an experienced real estate lawyer is crucial throughout the assignment process. At Hummingbird Lawyers LLP, our experienced team of Real Estate lawyers can help you:
- Draft or review assignment contracts to protect your interests;
- Identify and even minimize potential costs and risks;
- Review and explain the builder’s terms of assignment;
- Guide you through the assignment process; and
- Ensure that you have the right paperwork needed to finalize the assignment.
For more information, please get in touch with our firm. There is always a Toronto real estate lawyer or a Vaughan real estate lawyer available to help.
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