Non-Recourse Loan

Learn about non-recourse loans in Canadian real estate — what they are, how they protect borrowers, and when they’re used.

Non-Recourse Loan

August 08, 2025


What is a Non-Recourse Loan?

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not personally liable for any deficiency.

Why Non-Recourse Loans Matter in Real Estate

In Canadian commercial real estate, non-recourse loans limit borrower liability and protect personal assets.



Key points:
  • Commonly used for income-producing properties
  • Lender’s recourse is limited to the collateral property
  • May include 'carve-outs' for fraud or other specific events



Understanding non-recourse loans helps borrowers evaluate risk exposure.

Example of a Non-Recourse Loan in Action

The developer obtained a non-recourse loan, ensuring the lender could only claim the property if the loan defaulted.

Key Takeaways

  • Limits lender’s remedies to the collateral property
  • Protects borrower’s personal assets
  • Often used for stabilized income properties
  • May contain exceptions for bad acts by borrower
  • Important consideration in financing negotiations

Related Terms

Additional Terms

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Mortgagee in Possession

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Lease Surrender Agreement

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Green Infrastructure

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