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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

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

Leasehold Estate

A leasehold estate is an interest in real property where a tenant holds the right to use and occupy the property for a specified term under a lease. more

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