How Does An Assignment Sale Work In BC?

An assignment sale occurs when a buyer of a property elects to sell their interest in the property before the original sale transaction is completed. Since they do not own the property and title has not yet been transferred to the buyer, they are actually selling their agreement to purchase the property to another party (known as the Assignee).

In British Columbia, the BC Financial Services Authority requires that all purchase contracts presented by a realtor must include the following language, unless otherwise instructed in writing:

1.  The contract must not be assigned without the written consent of the seller; and
2. The seller is entitled to any profits from an Assignment of the contract by the buyer or any subsequent assignee.

These terms are included to protect the original seller of the property from the practice of shadow flipping.

Assignment Process

Once the two parties (the original buyer and the new buyer) have reached an agreement on the terms of the Assignment Agreement, then the original buyer must work with the original seller or developer to obtain their approval of this transaction.
Assuming the developers’ approval is obtained and the paperwork is completed, the following steps will need to take place:

1. The Assignee pays the deposit to the original buyer, along with any difference in price from the original purchase contract. For example, the original buyer agreed to pay $400,000 for the unit and gave the developer a deposit of $80,000 (20% of the purchase price). The Assignee agrees to pay $450,000 for the unit. This means they would pay the original deposit plus the additional $50,000 for the increased purchase price. The original buyer would receive $130,000 from the Assignee.
   This effectively completes the transaction between the original buyer and the Assignee and the original buyer is relieved of their obligations under the original Purchase Contract.
2.  The Assignee makes any further payments to the original seller or developer as detailed in the original purchase contract. This is particularly relevant in presale situations where a portion of the purchase price may be due to the developer during the construction phase.
3. The Assignee and developer complete the ownership transfer. The Assignee’s lawyer will register the transfer with the Land Title’s Office and transfer any remaining funds to the developer to complete the purchase.
4. The Assignee, at the time of closing, pays the Property Transfer Tax to the governing authority.

With any transaction of this size, it is always best to hire the most experienced professionals to assist you through the process. Having a qualified realtor, lawyer and accountant or financial advisor to handle the transaction on your behalf makes good sense and will help ensure a smooth transition.