ASSIGNING CONDO AGREEMENTS

How do you sell and buy a Condo before Registration?

With continued growth in the condo market, and more and more final or interim closings coming up, we are seeing a greater demand for the purchase or sale of a condominium before either interim closing or final closing with the builder.  While this is possible, there are a number of things to keep in mind.

1) Most new condo and house Agreements prohibit the sale or offering for sale of the unit at any time before closing, although there are exceptions. 

Often, even merely listing the unit is a breach of the Agreement which allows the builder to terminate the transaction, keep all deposits and sue for damages.  You should therefore not list an unregistered unit without first reviewing the Agreement.  Otherwise, you may prejudice the purchasers' deposits and rights under the Agreement.

2) Be prepared to obtain the builder's consent.  If the builder agrees it will often have its own forms which must be completed and fees which must be paid.

3) Even if a builders consents, it will often refuse to be involved in the deal between the original buyer and the new buyer.  From its perspective, the new buyer takes over and it closes with him or her.  It will not be involved in dealing with matters such as profits, assignment of previous deposits paid, etc..  This is left to the new buyer and the original buyer to work out. 

Therefore, you should consider certain issues, such as: 
- will any profit be paid on possession or final closing;
- when will the original deposits be repaid to the original buyer (how much the new purchaser will be able to pay 
  and when will often depend on how much of the price the new purchaser is financing); 
- when will possession take place given that the timing of consent is unknown;
- who will pay the assignment fee;
- is the resale price inclusive of builders adjustments or will the new buyer pay these;
- if interim has not taken place what are the interim occupancy fees expected to be? 

Considering these and other issues early will help in drafting the final agreement. 

If you intend to use a TREB/OREA agreement to make the new deal, you should make the transaction conditional on obtaining the assignment from the builder and on lawyer's review of the original Agreement, the new agreement and the builder's assignment documents.  This will allow the lawyer to ensure that all of the foregoing is dealt with in a schedule to the standard TREB/OREA agreement.

Assignment transactions can be done, but there are many matters which must be considered and covered. 

Generally, be careful, have a lawyer involved and expect that the transaction will require a little more to firm up.