An assignment sale is the sale of a pre-construction purchase contract before the home is finished. The original buyer (the assignor) hands their agreement of purchase and sale with the developer to a new buyer (the assignee), who then closes with the developer and takes title. This page covers how an assignment works, what each side pays, the income tax and GST/HST rules, and the legal steps. It is part of our guide to property types in Canada; the deposits, interim occupancy and Tarion coverage that come with the original purchase are covered in buying pre-construction in Canada.
How an assignment sale works
| Step | What happens | Who’s involved |
|---|---|---|
| 1. Original purchase | The buyer (assignor) signs the agreement of purchase and sale (APS) with the developer and pays the deposits | Assignor and developer |
| 2. Decision to assign | The assignor decides to sell the contract before closing | Assignor |
| 3. Find an assignee | The assignor, or their agent, finds a new buyer | Assignor and real estate agent |
| 4. Developer consent | The assignor asks the developer for consent, if the APS requires it | Assignor and developer |
| 5. Assignment agreement | The assignor and assignee sign an assignment agreement | Assignor, assignee and their lawyers |
| 6. Payment to the assignor | The assignee repays the assignor’s deposits and pays the assignment premium | Assignee to assignor |
| 7. Closing | The assignee closes with the developer, takes title and arranges the mortgage | Assignee and developer |
What the assignee pays
Suppose the original purchase price in the APS is $550,000, the assignor has paid $85,000 in deposits, and the assignee agrees to an assignment premium of $65,000.
| Component | Amount |
|---|---|
| Original purchase price | $550,000 |
| Assignor’s deposits, repaid by the assignee | $85,000 |
| Assignment premium (the assignor’s profit) | $65,000 |
| Total paid to the assignor | $150,000 |
| Balance owed to the developer at closing | $465,000 (the price less the deposits the developer already holds), paid with the assignee’s mortgage and own funds |
| Effective price to the assignee | $615,000 |
The assignee has to qualify for the mortgage at closing, which can be months or years after the assignment is signed. Ask the lender early how it values an assignment, since the deposits and premium repaid to the assignor are paid before closing and the mortgage only covers part of the balance owed to the developer.
Tax for the assignor (seller)
Income tax on the profit
The CRA generally treats a profit on assigning a pre-construction contract as business income, fully taxable at your marginal tax rate, rather than as a capital gain with its 50% inclusion rate. The residential property flipping rule also applies: Since January 1, 2023, the profit on a home in Canada you owned for less than 365 consecutive days is business income (fully taxed, with no principal residence exemption) unless the sale was due to a listed life event: death, a household change, a relationship breakdown, a threat to safety, serious illness or disability, job loss, a relocation for work or school, insolvency, or the home's destruction or expropriation. For a pre-construction purchase, the holding period restarts when you take ownership, and an assignment sold before then is caught too.
| Classification | Tax treatment | When it applies |
|---|---|---|
| Business income | Fully taxable at your marginal rate | The usual treatment of an assignment profit, and required under the flipping rule unless a listed life event applies |
| Capital gain | 50% of the gain is taxable | Only where the flipping rule doesn’t apply and you can show you bought to live in or hold the property, not to resell |
House flipping taxes in Canada and our guide to the residential property flipping rule cover the life-event exceptions in detail.
Income tax on the premium. With the $65,000 profit above, and a marginal rate of 30% (the rate depends on your province and other income), the income tax is $19,500, leaving $45,500 before GST/HST, fees and commissions.
GST/HST on the assignment
The CRA states that, effective May 7, 2022, “all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes” (CRA GI-120). In Ontario the rate is the 13% HST. How the tax is calculated on the assignment price, and whether the assignor or the assignee bears it, depends on the assignment agreement and CRA’s rules, so the agreement normally states whether the premium includes or excludes GST/HST. An accountant can work out the amount before the agreement is signed.
The assignee, not the assignor, takes title from the developer, so any GST/HST new housing rebate on the home goes to the assignee if they qualify.
Reporting
| Requirement | Details |
|---|---|
| Your tax return | Report the profit as business income (or as a capital gain only if the flipping rule doesn’t apply and the facts support it) |
| GST/HST | You may need to register for and remit GST/HST on the assignment; confirm with an accountant |
| Records | Keep the APS, the assignment agreement and proof of the deposits paid in case the CRA asks for them (see what can trigger a CRA audit) |
Tax for the assignee (buyer)
| Factor | Details |
|---|---|
| Cost of the home | The original price plus the assignment premium (in the example, $615,000) |
| GST/HST on the home | Handled through the builder at closing, as with any new-home purchase |
| Later sale | Your gain is measured from your full cost, including the premium; a home you live in may qualify for the principal residence exemption |
| Land transfer tax | Paid at closing; confirm with your lawyer how your province treats the premium in the taxable value |
Legal steps and costs
For the assignor
| Consideration | Details |
|---|---|
| Developer consent | Most APSs require the developer’s written consent; some forbid assignment or allow it only after a set date |
| Developer’s assignment fee | Many developers charge a fee for consenting, set out in the APS |
| Marketing limits | Some developers don’t allow an assignment to be listed publicly, for example on MLS |
| Legal fees | For drafting or reviewing the assignment agreement |
| Agent commission | If an agent finds the assignee; the rate is negotiated |
| Tax planning | Income tax and GST/HST, as above |
For the assignee
| Consideration | Details |
|---|---|
| Due diligence | Review the original APS, the development plans and the builder’s record |
| Legal review | Your own lawyer reviews both the APS and the assignment agreement |
| Mortgage qualification | You must qualify at closing, which could be years away, at the stress test rate in force then |
| Deposit protection | In Ontario, confirm how Tarion’s deposit protection and warranty apply to you as assignee |
| Pre-delivery inspection | Confirm you take over the assignor’s PDI and warranty rights |
| Closing costs | Closing costs are the same as for any new-home purchase, plus the premium |
Risks
| Risk | Who bears it | Details |
|---|---|---|
| Developer delays | Assignee | Closing moves further out; mortgage rates may change in the meantime |
| Developer insolvency | Both | Deposit protection has limits |
| Market decline | Assignee | The home may be worth less at closing than the effective price paid |
| Tax reassessment | Assignor | The CRA can reassess a profit reported as a capital gain |
| Mortgage qualification | Assignee | Must qualify on the future closing date |
| Contract restrictions | Assignor | The developer may refuse or delay consent |
Buying an assignment: trade-offs
| Advantage | Disadvantage |
|---|---|
| A new unit at a price that may be below what the developer now charges | The premium can cancel out that difference |
| A shorter wait, since construction is under way | Still exposed to delays |
| May take over incentives in the original APS | No direct relationship with the developer until closing |
| Can see the building in progress | May not be able to tour the specific unit |
Related pages
- Buying pre-construction in Canada: deposits, interim occupancy, HST and Tarion
- Buying a condo in Canada: the condo buying process and financing
- House flipping taxes in Canada
- Capital gains tax calculator
Sources
The figures and rules on this page come from these sources, last checked against them between September 23, 2026 and September 29, 2026. How we check facts.
- Canada Revenue Agency: Residential Property Flipping Rule
- Prime Minister of Canada: Prime Minister Carney cancels proposed capital gains tax increase