“Down, But Not Out”: CIBC, Urbanation Look Ahead On Condo Market

Pari Passu

Understand pari passu clauses in Canadian lending — what they are, why they matter, and how they protect creditors.

Pari Passu

August 08, 2025


What is a Pari Passu Clause?

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

Why Pari Passu Clauses Matter in Real Estate

In Canadian lending and real estate finance, pari passu clauses prevent one creditor from being subordinated to another without agreement.



Key points:
  • Ensures creditors rank equally for repayment
  • Protects lenders from being disadvantaged in insolvency
  • Often found in loan agreements and bond covenants



Understanding pari passu clauses helps lenders and investors manage risk.

Example of a Pari Passu Clause in Action

The loan agreement included a pari passu clause giving all participating lenders equal priority for repayment.

Key Takeaways

  • Guarantees equal ranking among creditors
  • Common in loan and bond agreements
  • Protects lenders during borrower default or insolvency
  • Can impact willingness of creditors to lend
  • Must be clearly defined in contracts

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

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. 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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