What is assignability?

One of the clauses normally included in a Real Estate contract is assignability, and it gives you the option to indicate whether the buyer can assign the contract or not, and whether he/she will remain responsible under the terms of contract after doing so.

If an assignment of contract occurs, it means that one party to an existing contract (the "assignor") has handed off the contract's obligations and benefits to another party (the "assignee"). The assignor being the current buyer in the contract, and the assignee a non-party, i.e. another buyer not currently part of the contract.

The next step is addressing the release of liability. The assignor may want the assignee to step into his shoes and assume all his contractual obligations and rights, releasing the original buyer from further liability under the contract. This means that if a buyer assigns the contract, that buyer essentially walks away from the transaction, with the assignee taking on all further obligations currently within the contract. It also means, if the assignee fails to meet any of the terms in the contract, the Seller has no recourse on the initial buyer just the assignee, which might be detrimental to the Seller.

Buyers must let their agent know if he/she has any intention of assigning his/her interests in the contract to another party, and whether they want to remain potentially liable under the contract should the assignee fail to perform.

When sellers receive an offer, they should also look for this clause in the contract and decide if they are willing to allow the buyer to assign the contract to a third party, and whether they will allow the initial buyer to just walk away, or hold the initial buyer to the contract terms as far as liability is concerned.

Lots of buyers, specially investors and foreigners decide to buy under a corporation like an LLC or a Trust owned by them to protect their assets or reduce tax liabilities. If you are a buyer who is thinking of forming a new corporation for the purchase you still need to check the assignment option under the contract, and leave the door open to assign the contract to your own corporation at any point during the transaction.

Call me if you’re thinking of Buying or Selling a property. I will make sure to go over all the clauses in the contract to benefit you and your interests, or refer you to a competent attorney in the matter.

Maria T. Villalobos 786-285-5855 or info@bestmiamihomes.net