Assignments – How to Complete the Forms
There is a standard form Agreement for assignments prepared by OREA. You should be using it.
I do understand that quite a few real estate agents are unfamiliar with the document and not quite sure how to fill it out correctly.
Therefore, I have reproduced the document, in part here. My commentary appears in Italics. I have chosen not to reproduce those parts of the Agreement that would otherwise appear in the standard Agreement of Purchase and Sale.
Also, we will go through an example.
John Smith bought a condo from ABC Developers Inc, at the pre-sales when the site first opened for $400,000 with three deposits of $15,000.00 each. So far he has paid two deposits.
The market has escalated and he has now sold the condo to Mary Jones for $575,000,00.
So, the question is: how do we fill out the form?
Brian Madigan’s Annotated Abbreviated Assignment Agreement
Assignment of Agreement of Purchase and Sale Condominium
Parties to Agreement
Assignor: John Smith
Assignee: Mary Jones
THE ASSIGNOR’S INTEREST IN THE REAL PROPERTY:
together with seller’s proportionate undivided tenancy-in-common interest in the common elements appurtenant to the Unit
The reference to seller here means ABC Developer Inc.
Purchase Price: $575,000.00
That was the full purchase price on the second deal, not just the assignment uplift. The deposit will be held by the Listing Agent for John Smith.
The Assignee and Assignor acknowledge that the Purchase Price noted above includes both the purchase price the Assignor is paying for the property as indicated in the Agreement of Purchase and Sale between the Assignor and the seller of the property attached hereto as Schedule C, and also includes the amount being paid by the Assignee to the Assignor as payment for the Assignment Agreement.
That means the original purchase price of $400,000.00 plus the market uplift of $175,000.00.
The Assignee and Assignor agree that the funds for this transaction will be calculated and paid as set out in Schedule B attached hereto and forming part of this Agreement.
This is the “paid on closing arrangement” and the outline for the funds.
Assignee agrees to pay the balance as more particularly set out in Schedules A and B attached.
Schedules A, B (Calculation of funds for this Agreement),
Schedule A is the regular one that you will come across. Schedule B is the actual breakdown and calculation of the various funds. It is peculiar to assignments.
We will break this down later.
C (Agreement of Purchase and Sale that is the subject of this Assignment),
This is a full and complete copy of the original Agreement from ABC Developers Inc.
2. ASSIGNMENT: The Assignor agrees to grant and assign to the Assignee, forthwith all the Assignor’s rights, title and interest, in, under and to the Agreement of Purchase and Sale attached hereto in Schedule “C”.
This is the assignment and the full transfer of rights under the underlying Agreement.
3. ASSIGNEE COVENANTS: The Assignee hereby covenants and agrees with the Assignor that forthwith upon the assignment of the Agreement of Purchase and Sale it will assume, perform, comply with and be bound by, all obligations, warranties and representations of the Assignor as contained in the Agreement of Purchase and Sale as if the Assignee had originally executed the Agreement of Purchase and Sale as buyer with the seller.
This is the assumption by the assignee, the new Buyer to take over.
4. ASSIGNOR COVENANTS: The Assignor covenants and represents that:
(a) the Assignor has the full right, power and authority to assign the prior Agreement of Purchase and Sale attached hereto as Schedule “C” (the “Agreement of Purchase and Sale”) and the Assignor’s interest in the property;
(b) the Agreement of Purchase and Sale attached hereto as Schedule “C” is a full and complete copy thereof and has not been amended, supplemented, terminated or otherwise changed in any way and is in good standing and has not previously been assigned.
(c) the Assignor will not amend the Agreement of Purchase and Sale without the Assignee’s prior written consent;
(d) after acceptance of this Assignment Agreement until the earlier of termination or completion of the Agreement of Purchase and Sale attached hereto as Schedule “C”, the Assignor will not further assign the Agreement of Purchase and Sale.
(e) neither party to the Agreement of Purchase and Sale (Schedule C) has done any act in breach of the said Agreement of Purchase and Sale or committed any omission with respect to the said Agreement of Purchase and Sale.
This is the outline of the new role for the Assignor.
7. FUTURE USE: Assignor and Assignee agree that there is no representation or warranty of any kind that the future intended use of the property by Assignee is or will be lawful except as may be specifically provided for in this Assignment.
The property started out as a farm and it is in the process of becoming a residential condominium. But, the Assignor doesn’t promise that.
8. INSPECTION: Assignee acknowledges having had the opportunity to inspect the property or the plans and documents for the property to be constructed and understands that upon acceptance of this offer there shall be a binding Assignment agreement between Assignee and Assignor.
Very, very peculiar, looking at the plans is an “inspection”. This makes no sense! It really should be here like that, but it is, so you have to be aware and make sure that the second Buyer is aware of that too. There really are no inspections!
10. RESIDENCY: (a) Subject to (b) below,
the Assignor represents and warrants that the Assignor is not and on completion will not be a non-resident under the non-residency provisions of the Income Tax Act which representation and warranty shall survive and not merge upon the completion of this transaction and the Assignor shall deliver to the Assignee a statutory declaration that Assignor is not then a non-resident of Canada;
(b) provided that if the Assignor is a non-resident under the non-residency provisions of the Income Tax Act, the Assignee shall be credited towards the Purchase Price with the amount, if any, necessary for Assignee to pay to the Minister of National Revenue to satisfy Assignee’s liability in respect of tax payable by Assignor under the non-residency provisions of the Income Tax Act by reason of this sale. Assignee shall not claim such credit if Assignor delivers on completion the prescribed certificate.
This is consistent with the Buyer’s obligation to verify the residency of the Seller in most transactions.
12. PROPERTY ASSESSMENT: The Assignee and Assignor hereby acknowledge that the Province of Ontario has implemented current value assessment and properties may be re-assessed on an annual basis.
The Assignee and Assignor agree that no claim will be made against the Assignee or Assignor, or any Brokerage, Broker or Salesperson, for any changes in property tax as a result of a re-assessment of the property, save and except any property taxes that accrued prior to the completion of this transaction.
This disclaimer doesn’t really work as it applies to those who are not party to the transaction.
15. APPROVAL OF THE AGREEMENT: In the event that consent to this Assignment is required to be given by the seller in the Agreement of Purchase and Sale attached hereto in Schedule C, the Assignor will apply, at the sole expense of the Assignor, forthwith for the requisite consent, and if such consent is refused, then this agreement shall be null and void and the deposit monies paid hereunder shall be refunded without interest or other penalty to the Assignee.
From time to time, there will be a restriction upon assignment. Some clauses are enforceable and some are not. In some cases, there is a fee that is required to be paid to the Seller.
16. AGREE TO CO-OPERATE: Except as otherwise expressed herein to the contrary, each of the Assignor and Assignee shall, without receiving additional consideration therefor, co-operate with and take such additional actions as may be requested by the other party, acting reasonably, in order to carry out the purpose and intent of this Assignment.
This is important. The transaction may continue for several years. This states that the Assignor, John Smith will continue to assist in the transaction as required, and no further compensation need be paid.
But, what if John becomes mentally disabled or dies? In that case, Mary Jones needs a Continuing Power of Attorney for Property that applies only to this property and is not revoked upon death. There is no requirement or obligation for this otherwise in the standard form.
17. DEFAULT BY SELLER: The Assignee and Assignor acknowledge and agree that if this Assignment Agreement is not completed due to the default of the seller for the Agreement of Purchase and Sale (Schedule C) that is the subject of this Assignment, the Assignor shall not be liable for any expenses, losses or damages incurred by the Assignee and this Assignment Agreement shall become null and void and all moneys paid by the Assignee under this Assignment Agreement shall be returned to the Assignee in full without interest.
What if the original condo developer runs into financial trouble? John Smith is not responsible, although he does agree to refund all the money. That might be quite a challenge after he has spent it all and left the country.
20. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Assignment (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Assignment including any Schedule attached hereto, shall constitute the entire agreement between Assignee and Assignor. There is no representation, warranty, collateral agreement or condition, which affects this Assignment other than as expressed herein. This Assignment shall be read with all changes of gender or number required by the context.
This provision is important because it contains an “entire agreement” clause.
BALANCE OF PAYMENT UNDER THIS ASSIGNMENT AGREEMENT:
The Assignee will deliver the balance of payment for this Assignment Agreement as more particularly set out in Item 6. on Schedule B, subject to adjustments, with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer using the Large Value Transfer System,
to the Assignor prior to completing the transaction in the Agreement of Purchase and Sale attached hereto as Schedule “C”
to be held in trust without interest pending completion or other termination of the Agreement of Purchase and Sale attached hereto as Schedule “C”.
The title transfer date is the final closing. Funds are to be held in trust until then. That could be quite some time. Opting for an earlier occupancy closing could be risky.
The Assignee and Assignor agree that the calculation of funds to be paid for this Assignment Agreement, subject to adjustments, is as set out in the following Items:
1. Total Purchase Price including the original Agreement of Purchase and Sale and this Assignment Agreement:
2. Purchase Price of original Agreement of Purchase and Sale as indicated in Schedule C:
3. Deposit(s) paid by Assignor to the seller under the original Agreement of Purchase and Sale as indicated in Schedule C, to be paid by the Assignee to the Assignor as follows:
It is important to get the correct calculations here.
1. This is $575,000.00.
2. This is $400,000.00
3. This is $30,000.00 (one more $15,000.00 payment is yet to be made)
(Upon acceptance of this Assignment Agreement and receipt of consent to assign from original seller, if applicable)
(Upon occupancy by the Assignee and receipt of consent to assign from the original seller, if applicable)
(Upon final closing of original Agreement of Purchase and Sale and this Assignment Agreement)
4. Payment by Assignee to Assignor for this Assignment Agreement:
5. Deposit paid under this Assignment Agreement (in accordance with Page 1 of this Assignment Agreement):
6. Balance of the payment for this Assignment Agreement:
Kindly note that you have to figure out when the closing will be, now, occupancy, or title transfer.
4.$175,000.00 (that’s the market lift),
5.$20,000.00 (this is the deposit on the assignment not the ABC deal),
6.$185,000.00, (that’s the market lift, less the deposit paid, plus credit for the Assignor’s deposit paid to ABC, so $175,000.00 less the $20,000.00 deposit ($155,000.00) plus the $30,000.00 in deposits paid so far to ABC, or $185,000.00. The Assignee will pay the next deposit instalment in favour of the Seller when it becomes due.
It is noteworthy that the Assignment transaction could be closed upon occupancy or upon the final title transfer. Title transfer would be much preferred and the least risky alternative. The Schedule A requirement is to pay the funds ahead of time.
Brian Madigan LL.B., Broker