Pari Passu
Understand pari passu clauses in Canadian lending — what they are, why they matter, and how they protect creditors.
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
- Subordination Agreement
- Mortgage
- Debt Service Ratios
- Personal Property Security Act
- Encumbrance
Average and median describe different aspects of the same month’s transactions. Both are affected by the mix of homes sold.
Category averages compare different homes and locations; the gaps are not estimates of the cost to upgrade an otherwise identical property.
The five categories shown account for 5,000 of the board’s 5,057 sales. The remaining 57 transactions were in other housing categories.
Monthly observations are not seasonally adjusted. Active listings count properties available at month-end; they are not construction inventory.
Average and median prices share one dollar axis. These unadjusted transaction measures do not control for changes in the homes sold.
TRREB’s 416/905 categories compare the apartments sold in each area. The difference does not isolate a location premium for equivalent units.
5680 Oak Street in Vancouver and its surrounding context. (MCMP Architects)
Ground-level renderings of the tower proposed for 5680 Oak Street in Vancouver. (MCMP Architects)
