The Alberta real estate market, like many others in Canada, offers a unique process known as contract assignment. This practice, which allows an original buyer (the assignor) to transfer their interest in a property to a new buyer (the assignee) before the closing date, has become an increasingly common method for facilitating real estate transactions.

Understanding the intricacies of contract assignment can benefit both buyers and sellers, ensuring they navigate the process smoothly and legally.

What is contract assignment?

Contract assignment involves the transfer of the rights and obligations under an existing purchase agreement from the original buyer to a new buyer. Essentially, the assignor steps aside, allowing the assignee to take their place in the contract, with the same terms and conditions that were initially agreed upon with the seller.

This practice can be advantageous for various reasons. For the assignor, it can be a way to exit a contract they can no longer fulfill, whether due to financial constraints, changes in personal circumstances or better investment opportunities elsewhere. For the assignee, it offers a chance to acquire a property without the need to negotiate a new contract, often in markets where inventory is limited or prices are rapidly increasing.

Legal framework and requirements

Contract assignment is governed by specific rules and requirements to protect all parties involved. The primary legal considerations include:

• Consent of the seller: The seller’s consent is usually required for a contract assignment to take place. This must be obtained in writing and the seller has the right to refuse.
• Disclosure: Full disclosure to all parties involved is crucial. The assignor must inform the seller of their intention to assign the contract, and the assignee must be aware of all terms and conditions of the original agreement.
• Assignment agreement: An assignment agreement is a separate document that outlines the terms of the assignment, including any fee or compensation paid by the assignee to the assignor. This agreement must be carefully drafted so that it is legally binding and enforceable.
• Deposit transfer: If the original purchase agreement included a deposit, the assignment agreement should specify how this deposit will be handled. Typically, the deposit is transferred from the assignor to the assignee, but the specifics can vary.

Benefits and risks

Contract assignment offers several benefits but also comes with risks that both assignors and assignees should be aware of.

Benefits:

• Flexibility: Assignment provides a way for the assignor to exit a contract without significant financial loss. It gives the assignee a chance to purchase a property in a competitive market without starting from scratch.
• Potential for profit: Assignors may be able to profit from the assignment if the property's value has increased since the original purchase agreement was signed. The assignee might be willing to pay a premium to secure the property.

Risks:

• Seller's refusal: If the seller refuses to consent to the assignment, the assignor remains obligated under the original contract, which could lead to legal and financial complications.
• Market fluctuations: Real estate markets can be unpredictable. If property values decrease, the assignee might end up paying more than the current market value, leading to potential losses.
• Legal and financial complexities: The assignment process involves additional legal documentation and potential financial implications, including assignment fees and taxes. Both parties should seek legal and financial advice to navigate these complexities.

In conclusion

It’s important that individuals take practical steps to be sure that these transactions are one properly. This includes engaging a real estate lawyer and a real estate agent experienced in contract assignment so that all legal and procedural requirements are met. Please contact me without hesitation if you’re looking for an agent with such expertise.