My name is Edmund Xie and I am a real estate agent (Realtor®) in Vancouver, BC, Canada. I am licensed by the Real Estate Council of British Columbia and is a member of the Real Estate Board of Greater Vancouver and have full access to the MLS (Multiple Listing Service) system. I am passionate about helping my clients buy and sell property in the Metro Vancouver area. 

A Realtor You Can Trust

If you are thinking about buying or selling a home, please feel free to give me a call at 604-708-1786 or send me an email. Whether you are a first time home-buyer, looking to sell your property, or an experienced investor looking for an investment property, I can provide you with comprehensive real estate solutions. I speak English, Mandarin Chinese, and Cantonese.

As a realtor, I am dedicated, hard-working and knowledgeable. Through my connections and experience, I am also able to recommend mortgage brokers, home inspectors, real estate lawyers, insurance brokers, architects, builders, and trades people with a proven track record and who are familiar with the area and types of homes in your search area.

Separate from my real estate business, I am also a trademark and patent lawyer. I graduated with a law degree (LL.B.) in 2009 from the University of Victoria, Faculty of Law. Through my law practice, I have gained valuable experience with client services and business management.

Presale Contract Assignments

I am especially knowledgeable about presale contract assignments. A presale contract assignment is when the original buyer of a presale condo sells their rights to the condo to another buyer before that condo is completed. The reason the word “Assignment” is used is because the original buyer assigns their contract to the new buyer. The seller of an assignment is the assignor and the buyer of an assignment is the assignee.

Presale contract assignments can be extremely complicated and there are many potential risks for both the seller (the assignor) and the buyer (the assignee). Written consent from the developer is generally required and the developer may require an assignment fee to the developer before granting the consent to a presale contract assignment. There are also thorny issues to consider such as when the assignee should pay the deposit and the lift (the profit) to the assignor, which party (the assignor or the assignee) should be responsible for remitting the GST to Canada Revenue Agency, and whether the assignee should withhold a portion of the payment to the assignor to comply with Income Tax Code if the assignor is not a resident in Canada. As a realtor with a law degree, I can guide you through this complicated process and draft a presale assignment contract that looks out for your best interests, whether you are the assignor or the assignee. 

Presale Contracts

Developers in British Columbia commonly pre-sell residential units such as strata titled apartments (condos) and townhouses. These ‘‘pre-sales’’ include any residential unit that is purchased prior to the completion of construction. Typically developers enter into contracts that provide for units to be built within two to five years at a fixed price, and require deposits to be paid by the prospective purchasers. The deposits are held in trust by a lawyer, notary public or real estate brokerage. 

A prospective purchaser should carefully review the developer’s Disclosure Statement. The Real Estate Development Marketing Act (REDMA) provides that a developer must not enter into a contract to sell a development unit unless a copy of the Disclosure Statement has been provided to the purchaser and the purchaser has been given a reasonable opportunity to read it. The Disclosure Statement explains what the developer is selling and describes the purchaser’s right under the Real Estate Development Marketing Act to cancel the pre-sale contract within seven days of signing it. It is important for prospective purchasers, who either already have a pre-sale contract or are considering entering into one, to appreciate the risks associated with them. Some of these risks are explained below. 

A proposed development may be delayed, or may not proceed at all, for a variety of reasons including: inadequate sales; delays in obtaining financing or building permits; higher than expected costs for construction materials; and an inability to hire skilled construction workers. There is also a risk that real estate prices may decline in the future. If the developer completes a pre-sale contract within the time set out in the contract, the purchaser may be obligated to complete the purchase at the agreed price, even though the real estate may have declined in value. If a purchaser fails to complete the purchase, the specific terms of the contract may authorize the developer to not only keep the deposit but also pursue other legal remedies. Such remedies may include legal action to seek compensation from the purchaser for any losses beyond the amount of the deposit, or actual performance of the contract. 

A purchaser may wish to assign the contract to another purchaser prior to the completion date. Depending on the specific terms of the pre-sale contract, assignments may not be permissible, or may require a substantial assignment fee to be paid to the developer. The risks associated with pre-sales apply to a new purchaser who is assigned a pre-sale contract.

Why Do Presale Contract Assignments Occur?

In the Vancouver real estate market, assignments often occur when a presale has appreciated significantly in value prior to completion. The current buyer would like to take the appreciation while it’s up, and assign it to another buyer.

It used to be the case where buyers could “shadow flip” in residential sales, and did not require the sellers approval in order to assign the property prior to completion. This was a huge issue in residential real estate sales in 2015 particularly, and was subject to scrutiny by the news media (especially the Globe and Mail newspaper). The Real Estate Council of BC has since May 16, 2016 required that the contract can’t be assigned without the written consent of the seller and that any profit from an assignment goes to the initial seller to avoid “shadow flipping” and assignments without the sellers knowledge. However, this restriction does not apply to the presale market, where assignments are actually more common.

Section 8.2(2) of the new regulations states: “This section does not apply in relation to a contract for the sale of a development unit by a developer, as those terms are defined in section 1 of the Real Estate Development Marketing Act.”

Assignments may occur in residential resale real estate where the original buyers are unable to complete for whatever reason like a loss of employment, change of employment, divorce, death, or critical illness, or in a rising real estate market, where the the original buyers want to realize the gain before the completion date.

There may be restrictions on presale contract assignments which are imposed by the developer. If you are the original buyer and wish to assign a presale contract, you will need to refer back to the original Contract of Purchase and Sale and the Developer's Disclosure Statement to determine whether or not you are allowed to assign the presale contract. Some terms you may encounter, specifically for presales, are:
  • The developer's written consent may be required.
  • Marketing can be very tricky. MLS (Multiple Listing Service) marketing may be prohibited. Some developers do not allow the advertising and sale of assignments until all the development units are sold out.
  • A time frame when you cannot assign the contract.
  • An assignment fee to be paid to the developer in the presale scenario, usually 1% to 2.5% of the sale price.
As reported in the Vancouver Sun on October 4, 2017, a developer in Vancouver has increased the assignment fee for a condo project at the West End from 1.5 per cent of the initial purchase price to 25 per cent of the profit made on the assignment. See http://vancouversun.com/business/local-business/developer-hikes-fee-for-re-assigning-a-pre-sale-condo-in-effort-to-dampen-speculation

What Are the Advantages of an Assignment for the Original Buyer Assigning the Contract?

If a presale contract is assignment prior to completion, the assignor (original buyer) can most likely avoid the closing costs and land transfer tax associated with the subject property. The seller/assignor avoids the carrying costs (mortgage, maintenance fees, taxes, etc.) for the time between listing the property and selling a property.

What Are the Advantages of Buying an Assignment for the New Buyer?

The assignee (new buyer) may receive a better price than other current properties on the market. This will also depend on the original buyer’s motivation to sell. The assignee will receive a brand-new home and may also have the opportunity to make finishing selections, such as the kitchen or bathroom colour scheme, depending on when the assignment takes place. The assignee may be able to buy into a condo unit in a project that had been completely sold out. Additionally, depending on the completion date of the condo project, the assignee may be able to move into a condo unit much sooner than buying a brand new presale unit which may take three or four years to construct. 

GST Related to Pre-sale Contract Assignments

A common question is whether the assignor has to pay GST for the Assignment Amount when assigning a pre-sale contract. This question is separate from income tax issues related to an pre-sale assignment. The Assignment Amount is equal to the “reimbursement of the deposit”
and the profit (or the lift). Whether GST is payable on the Assignment Amount largely depends on the nature and intention of the Assignor. If this is an isolated transaction, and the Assignor entered into the Contract of Purchase and Sale intending to close on the transaction, the Assignment Amount is probably not subject to GST. If the Assignor entered into the Contract with the intention to flip the Contract, then the Assignment Amount is subject to GST.

If the Assignment Amount is subject to GST, the Assignor will have to  complete the appropriate forms remit the GST to the Canada Revenue Agency. For example, if the Assignment Amount is $300,000, the GST amount is 5% of $300,000, which is $15,000.  

If the Assignor is a non-resident of Canada for tax purposes, the Assignee will have to remit the GST payable to the CRA. In Vancouver's pre-sale market, many original purchasers are non-residents of Canada for tax purposes (even though some of them may possess a Canadian passport but live abroad), the Assignee should make sure that the GST for the Assignment Amount is properly remitted to the CRA.

For more information, refer to the CRA's GST/HST Info Sheet GI-120 entitled Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120-assignment-a-purchase-sale-agreement-a-new-house-condominium-unit/assignment-a-purchase-sale-agreement-a-new-house-condominium-unit.html

Income Tax Related to Pre-sale Contract Assignments

The Assignment agreement should include a space for the Assignor to make a declaration that they are a resident or a non-resident of Canada for tax purposes. If the Assignor is not a Canadian resident and they assign the contract for a profit (a “lift”), there is a requirement on the Assignee to hold back 50 or 25 per cent, depending on the circumstances, of the Assignment Amount until a clearance certificate is obtained from the Canada Revenue Agency.

When should the the Assignment Amount Be Released to the Assignor

To protect the Assignee's interest, the pre-sale assignment agreement can stipulate that the Assignment Amount, once paid and when all conditions, if any, are waived or satisfied, is to be held in trust by the stakeholder (usually the realtor's brokerage) and is to be released to the Assignor upon the transfer of the property being submitted for registration in the appropriate Land Title Office. This mechanism protects the Assignee's interests.

To protect the Assignor's interest, the pre-sale assignment agreement can stipulate that all of the Assignment Amount (i.e., reimbursement of the deposit, and the lift) is released to the Assignor upon all conditions being satisfied. This mechanism protects the Assignor's interest, but the Assignee is at risk if the developer fails to complete the project.

A compromise mechanism is for a portion of the Assignment Amount to be released to the Assignor upon all conditions being satisfied, and the Balance only released to the Assignor once the title is transfer to the Assignee.

If you are thinking about assigning or buying a presale contract, make sure to talk to the right Realtor. You can give me a call to discuss what's right for you. 

Qualifications of Edmund Xie
  • Licensee, Real Estate Council of BC
  • Member, Real Estate Board of Greater Vancouver
  • University of Victoria, LL.B. (law degree), 2009