What Is an Assignment Contract?

An assignment contract in real estate is a legal agreement that transfers a buyer's rights and obligations under an existing purchase contract to a new buyer, subject to the original seller's consent.

In the context of luxury new construction, an assignment occurs when the original pre-construction buyer — the assignor — transfers their rights under the developer purchase contract to a new buyer — the assignee — before the project reaches closing.

Key elements of an assignment contract

The original purchase contract and all amendments must be incorporated by reference. The purchase price the assignee will pay — which may be different from the original contract price — must be clearly specified. The developer's consent, if required by the original contract, must be obtained and documented. The allocation of earnest money deposits between assignor and assignee must be specified. Any assignment fee payable to the developer must be addressed. Representations and warranties from the assignor about the status of the original contract — no defaults, no pending disputes — must be included.

Due diligence for assignees: A buyer considering purchasing an assignment should conduct the same due diligence on the underlying purchase contract as they would on any new construction purchase — including review of the developer's financial condition, construction progress, escrow account status, and HOA documents.