What is an Assignable Contract?

In a nutshell, an assignable contract is a contract that allows you to sell on a property before the completion date of the deal.

It could say something like "sold subject to contract and exchange to “Joe Bloggs or assignee." These sorts of contracts are normally used in connection with off-plan properties, but they can also be good in other situations, for instance if you are doing a refurbishment or renovation.

In certain circumstances, such as a property with vacant possession, you may have negotiated that you go in and start the refurbishment/renovation after exchange of contracts but completion might be set for eight weeks time.

Just before completion when you have almost finished the refurbishment someone makes an offer for the property that is too good to refuse. Because you have a contract that is assignable you can just sell on the contract to them on completion and you take the difference between what you agreed with the vendor as the selling price and what the new buyer is paying you.

These can prove to be especially useful for property investors that flip a lot of properties. These sorts of contracts are also used a lot when buying directly off developers; however, some developers don’t like them and they won’t deal with you if you want to purchase in this way. So if you plan to buy directly from a developer, be sure to check that using assignable contracts are o.k.

Developers dislike dealing with contracts that are assignable for a number of reasons. One of which maybe that they dislike the thought of someone else profiting from their development before if is completed, which is exactly what you could do if you bought it right at the beginning of the off plan stage and sold it six months before completion for a profit.

To make sure that you use assignable contracts correctly, you must make sure that your solicitor prepares a contract for you that is fully assignable

A contract that is assignable can be a very affective way of making thousands of pounds each year from property without ever really owning it.

There are lots of people who want to profit from property, but don’t want the perceived hassle of owning it. Many can and do make a very good living from just using these contracts. This is also sometimes known as contract trading.

Using an assignable contract is not just applicable for property investing. It can and is used very effectively in many different ways in many different industries.

If you have found this explanation of what an assignable contract is useful you might want to check out our Property Glossary page. This is where you can find out lots of different definitions of property terms, some that may be familiar to you and others that may not be.

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