Pre-construction assignment calculator for Toronto condos

What is a pre-construction assignment?

An assignment is the sale of your right to buy a home that hasn't been built or closed yet. You signed an agreement with the builder and paid deposits; before final closing you transfer that agreement to someone else. They reimburse your deposits, pay you a premium (the "uplift") on top of your original price, and close with the builder in your place.

Most Toronto pre-construction agreements need the builder's written consent to assign, and many charge an assignment fee or restrict marketing the unit before occupancy. Those terms are in your agreement, so treat the fee in the calculator as an example to replace with your own number.

People assign for three reasons: the market rose and they want the gain without closing; the appraisal came in low and they can't fund the difference; or their plans changed. The right choice depends on the cash you have, how the lender values the unit, and how the profit is taxed.

How much do you actually keep when you assign?

Less than the uplift. On a $725,000 unit with $145,000 in deposits, a $5,000 example builder fee, $1,500 legal, 3% commission on the uplift, 13% HST on the uplift and a 25% tax reserve:

The break-even assignment price, where you recover every dollar of deposits after costs, is $732,738: $7,738 over your original price. Assign below it and you're paying to leave the agreement, which can still beat being unable to close.

Does HST apply to an assignment sale?

For new housing, generally yes. CRA's position is that assignment sales of newly constructed or substantially renovated homes are taxable for GST/HST, including assignments by individuals, for agreements from 2022-05-07. The part of the assignment price that reimburses your deposit is excluded from the taxable amount when the assignment agreement says so in writing. The assignor normally collects the tax.

That's why the calculator applies 13% to the uplift only, by default: $10,400 on a $80,000 uplift. Whether it's collected on top of the price or comes out of your proceeds depends on how the agreement is written, so have your lawyer draft it before you list.

How is a profit on an assignment taxed?

CRA's residential property flipping rule deems the profit on residential property owned for fewer than 365 consecutive days to be business income, fully taxable, and any loss deemed nil, for transactions from January 1, 2023. CRA says assignment profits are treated the same way. There are exceptions for life events such as death, a new child, separation, serious illness, job loss or a work relocation.

Business income is taxed at your marginal rate, so the reserve you set matters: at a 25% reserve the tax line on the example is $15,175. We don't decide which treatment applies to you; an accountant does.

What does the buyer of an assignment pay?

The assignee pays you the deposits and the uplift, then closes with the builder for the original price. Ontario charges land transfer tax on the whole consideration: the assignment payment plus the purchase price in the assigned agreement (plus extras and upgrades). Inside Toronto we apply the City's tax to the same total; the City's own pages don't address assignments, so confirm it with your lawyer.

Lenders lend on the lower of price and appraisal. When an assignment price runs ahead of what an appraiser will support, the buyer funds the difference in cash, which is why assignment buyers should line up financing before they sign.

Why does a low appraisal force so many assignments?

Because the lender's loan is a share of the appraisal, not the price you agreed years earlier. With $145,000 down and $40,000 of cash available, closing on the $725,000 unit looks like this:

A broker can't change an appraisal, but can shop lenders with different loan-to-value limits and appraisal practices, or line up a second appraisal. Ask before the closing date, not after.

Should you assign, close and resell, or close and hold?

On the default example, measured on the same deposits:

Holding looks different because it's unrealized: the equity is still in the unit and carrying costs come out of rent. Reselling soon after closing pays land transfer tax and selling costs twice over the life of the deal, which is why it rarely wins on a flat market. Change growth, rent and the horizon in the calculator to test your own view.

What should you ask a broker before assigning or buying an assignment?

1. Which lenders finance this building, and at what loan-to-value on a new-construction appraisal?
2. If the appraisal is short, which lenders allow a second appraisal or a higher loan-to-value?
3. Can my rate hold be extended to the occupancy or final closing date?
4. For a buyer: will the lender treat the deposit reimbursement and uplift as part of my down payment, and how must they be documented?
5. Are you licensed at the right level? Most new-construction lenders are institutional, but a private bridge needs a Level 2 agent or broker (check the licence).