New Toronto Assignment Sale Rules

Selling

There has been a lot of talk lately about the new Toronto assignment sale rules and what it all means for both buyers and sellers.

But there has also been a lot of misinformation and confusion around what the rules actually mean. So, we went directly to our numerous sources and found out exactly what they mean.

The new rules came into play as of May 7th, 2022. So, any transaction taking place on or after May 7th will need to honour these new rules.

After speaking with our teams of lawyers, tax accountants, and even directly with our contacts at the CRA, here is what you need to know.

All Assignment Sale transactions will now be subject to a 13% HST charge payable by the seller on the profit of the sale.

What Does the New Toronto Assignment Sale Tax Mean?

Let’s say you purchased a condo for $800,000.00 and sold it on assignment for $1 Million dollars. You now have to pay 13% HST on the $200,000.00 profit. In this case that would be $26,000.00.

Prior to this, there were different taxes based on intended usage – if you were an investor versus an end-user.

But now, this new tax will impact every assignment sale, regardless of the intended usage.

Market Impact

Will the new Toronto assignment sale rules kill the assignment sale market in Toronto? Absolutely not.

Selling on assignment is one of the best ways to make money in today’s market without getting a mortgage, and many investors will still use this strategy to make money. With the majority of investors making a solid return on their purchase, this small price to pay will not outweigh the profits at the end of the day.

When examining profit projections on assignment sale transactions, you need to ensure you include this new cost, plus your capital gains in all of your market analyses.

What Is an Assignment Sale?

An assignment sale is a type of real estate transaction that’s typically focused on pre-construction properties. The original buyer of a property allows another buyer to essentially take over the original buyers’ rights and obligations of the pre-construction Agreement of Purchase and Sale that they have with the developer. This takes place before the original buyer closes on the property or takes possession of it. The buyer of an assignment sale completes the deal with the seller/developer.

Even though this type of real estate transaction can take place with any type of property, it’s most common among pre-construction condos.

If you’re looking for more in-depth details on Assignment Sales, visit our All About Assignment Sales page on our website. Trust the experts who know how to analyze investments and determine if they’re beneficial to you as a buyer or a seller.

 

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