Assignment of Contract (Pre-Delivery Sale)
Pre-delivery sale · Novation of preliminary purchase agreement · Transfer of off-plan rights · Assignment of purchase agreement
Definition
An assignment of contract (pre-delivery sale) occurs when an original buyer of an off-plan property transfers their rights, obligations, and legal position under a preliminary purchase agreement to a secondary buyer prior to construction completion and final title registration. The secondary buyer assumes all remaining installment obligations toward the developer.
In detail
Mechanism of Contract Assignment
An assignment of contract allows an investor (the assignor) to monetize capital appreciation achieved during the construction phase of a building project without taking final ownership or paying full completion costs. The incoming buyer (the assignee) steps into the contractual shoes of the assignor, acquiring the rights to the future real estate asset upon fulfilling the remaining contract obligations.
Legal & Administrative Requirements
- Developer Approval: Most off-plan preliminary agreements mandate formal developer consent before an assignment can occur. Developers enforce this to verify the liquidity of the incoming purchaser and maintain control over their project's buyer roster.
- Public Registry Amendment: In legal jurisdictions such as Georgia, preliminary purchase agreements are registered at the national property registry. An assignment requires a formal amendment or tripartite contract registered in the official database to supersede the initial buyer's claim.
- Developer Administrative Fees: Developers often levy an assignment processing fee—either a fixed sum or a percentage of the total contract value—to issue consent and revise project administration records.
ROOT CAUTION: Assignees must perform complete legal due diligence on both the original contract terms and the developer's construction timeline before finalizing the transfer.
Tax and Financial Structure
1. Equity Transfer: The assignee reimburses the assignor for the cumulative installments already paid to the developer, plus an agreed-upon profit premium.
2. Assumption of Debt/Installments: The assignee assumes the remaining scheduled payment liabilities due to the developer.
3. Tax Liabilities: Depending on tax residency and holding duration, the profit margin realized by the assignor may be subject to local capital gains tax rules. In Georgia, new-build property prices set by developers explicitly include 18% Value Added Tax (VAT), which remains attached to the underlying developer payment schedule.
Georgian context
In Georgia, contract assignment is a widely utilized exit mechanism for off-plan investors operating in high-growth urban hubs like Tbilisi and Batumi. Under Georgian practice, an assignment is executed either as a tripartite agreement between the assignor, assignee, and developer, or a bilateral assignment accompanied by written developer authorization. Crucially, the assignment must be formally registered with the National Agency of Public Registry (NAPR) to legally transfer the registered preliminary right of ownership. Georgian developer pricing on off-plan projects always includes 18% Value Added Tax (VAT). When assigning a contract, the base developer contract value retains its standard VAT treatment, while any profit margin paid to the assignor is treated separately depending on whether the assignor is an individual or a corporate entity. Note that acquiring rights via contract assignment does not grant immediate eligibility for Georgia's real estate residency pathway; property residency requires an actual registered title deed on real estate valued at or above 150,000 USD.
Real example
An investor purchases an off-plan apartment in Tbilisi for {{data:property_price}} under a preliminary contract requiring a 30% down payment ({{data:down_payment}}) and remaining monthly installments. Prior to project completion, the property market value appreciates. The investor assigns the contract to a new buyer for a premium of {{data:assignment_premium}}. The new buyer pays the initial investor {{data:assignee_upfront_payment}} (covering the initial {{data:down_payment}} plus the {{data:assignment_premium}} profit margin). The transaction is registered at NAPR, after which the new buyer assumes responsibility for paying the remaining balance directly to the developer under the original payment schedule.
Common mistakes
- ×Assuming developer consent is legally unnecessary without reading the transfer clauses in the preliminary contract.
- ×Failing to register the contract assignment at the National Agency of Public Registry (NAPR).
- ×Miscalculating net profit by forgetting to factor in developer assignment fees and public registry costs.
- ×Expecting off-plan assignment contracts to qualify immediately for Georgia's 150,000 USD real estate residency permit before full completion and title registration.
Frequently asked questions
Can I assign my off-plan contract in Georgia without developer permission?
No. Standard preliminary purchase and sale agreements in Georgia contain specific clauses requiring prior written consent from the developer to assign rights to a third party.
Must a contract assignment be registered with NAPR in Georgia?
Yes. To protect the secondary buyer's legal rights against third-party claims, the assignment agreement must be registered at the National Agency of Public Registry (NAPR).
How is VAT handled during a contract assignment in Georgia?
Developer prices for new builds in Georgia always include 18% VAT. This VAT allocation remains attached to the base contract installments owed to the developer. Any secondary premium paid directly to the assignor must be evaluated under individual tax rules.
Does buying an assigned off-plan contract qualify me for Georgian residency?
No. Georgia's residency permit by real-estate investment requires holding registered full title to property valued at 150,000 USD or more. An assignment of an off-plan contract only transfers a preliminary right to future ownership.
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