Every so often we encounter a financing request that does not fit the mold, and co-op properties are a perfect example. Unlike condos or freehold homes, co-ops have a unique ownership structure that complicates lending. As such, our experience is such that a credit union is your best bet for financing a co-op.
Buyers of a co-op do not receive registered title to real estate. Instead, they own shares in a co-op corporation, along with an occupancy agreement that gives them the right to live in a specific unit.
That distinction makes a huge difference. Conventional mortgages rely on a lender’s ability to register a charge against title. With a co-op, no such title exists, which means financing must be structured differently.
How co-op financing works in practice
We asked Bill Denstedt of Loopstra Nixon LLP for insight. Bill explained:
“You cannot register a conventional charge against title, since they won’t own it. The usual approach is to take a pledge of the borrower’s shares and an assignment of any occupancy agreements, with a PPSA (Personal Property Security Act) registration as security. This makes the loan more like secured lending against personal property and the rights provided through the occupancy agreement than a mortgage against land.”
In other words, a co-op loan is closer to secured personal lending than to real estate financing. Security is typically taken by way of a General Security Agreement, registered under the PPSA in common-law provinces, or by similar instruments under Quebec’s Civil Code.
Default remedies are also different. Bill notes: “In a default scenario, your ability to realize on the security depends on selling the shares and transferring the occupancy rights. Co-op boards often have approval rights and can reject, which can delay or even prevent realization.”
Even with a low loan-to-value ratio, enforcement is not straightforward. The co-op board’s role, combined with limited marketability of co-op units, introduces additional uncertainty for lenders.
Co-op financing across Canada
While the fundamental challenge is the same nationwide, i.e. no registrable mortgage, the prevalence of co-ops, the governing legislation, and the availability of lenders varies by province and territory.
Here is a comparison of how co-op financing looks across Canada:
Co-op financing across Canada – comparison
| Province/Territory | Prevalence of co-ops | Legal framework | Lender willingness | Key challenges |
| Ontario | Moderate, especially in Toronto | PPSA security, no registrable mortgage | Some credit unions and private lenders, banks generally no | Board approval, resale restrictions, uncertain value, higher legal costs |
| British Columbia | Relatively common in Vancouver | Co-operative Association Act, PPSA for security | Credit unions like Vancity or Coast Capital may finance, banks generally avoid | Same as Ontario, capped resale rules in some co-ops |
| Alberta | Rare, some in Calgary and Edmonton | PPSA framework | Limited credit union support | Small buyer pool, board discretion, lender reluctance |
| Saskatchewan | Very rare | PPSA framework | Credit unions only, case by case | Extremely illiquid market, resale challenges |
| Manitoba | Rare but present in Winnipeg | PPSA framework | Credit unions more open than banks | Marketability issues, lengthy enforcement |
| Quebec | Most co-ops in Canada, especially Montreal | Civil Code, not PPSA | Very limited for equity co-ops, banks avoid | Most are non-profit rental-style co-ops, strict resale controls |
| Nova Scotia | Some in Halifax | PPSA framework | Credit unions and private lenders | Same risks as Ontario, fewer lender options |
| New Brunswick | Very few | PPSA framework | Credit unions only | Lack of sales comparables, enforcement delayed by board approvals |
| Prince Edward Island | Extremely rare | PPSA framework | Very limited options | Co-ops obscure, lenders lack experience |
| Newfoundland and Labrador | Very rare | PPSA framework | Credit unions case by case | Similar to PEI, very illiquid |
| Yukon | Almost none | PPSA framework | No practical lender experience | Government or private solutions more likely |
| Northwest Territories | Almost none | PPSA framework | Very limited | Same as Yukon |
| Nunavut | None on record | PPSA framework | Not applicable | Housing largely government-managed, not co-op based |
Additional risks and considerations
Beyond the structural issues, co-ops pose practical challenges that brokers and borrowers must manage.
- Board approval: Many co-ops require consent before shares can be pledged as security, and before buyers can be approved in a resale or default scenario.
- Resale restrictions: Some co-ops cap resale prices or limit resale to an approved buyer pool. This reduces marketability and complicates valuations.
- Liquidity risk: Even if a borrower defaults, lenders can face months or even years of delays before the board approves a new buyer.
- Legal costs: Specialized documentation is required, including GSAs, PPSA registrations, and legal opinions. Clients should expect higher-than-normal legal fees.
- Insurance and taxes: Co-op corporations often collect property taxes through monthly fees. Lenders will want clarity on insurance responsibilities, both for the building and the individual member’s contents.
Broker and borrower checklist
Here is a practical guide for anyone considering co-op financing in Canada.
Before starting
- Confirm the co-op type. Is it equity-based with resale value, or a non-profit rental-style co-op? Non-equity co-ops cannot be financed.
- Identify local credit unions or niche lenders willing to consider the deal. The Big Five banks rarely participate.
- Expect down payments of 20% to 35%, since default insurance is not available.
What to ask the co-op board
- Will the board approve pledging shares as collateral?
- Are there resale or transfer restrictions?
- How long does it take to approve a new buyer if the shares need to be sold?
Legal and documentation
- Review the co-op’s bylaws, occupancy agreement, and financial statements with legal counsel.
- Prepare a General Security Agreement and PPSA or equivalent registration.
- Clarify insurance obligations between the corporation and the member.
Financial due diligence
- Review monthly fees, reserve fund, and history of special assessments.
- Confirm how property taxes are paid.
- Understand any resale restrictions that affect value.
Warning signs
- Slow or uncooperative co-op boards.
- Missing or inconsistent bylaws and financials.
- Lenders that are not clear on co-op lending mechanics.
Success tips
- Engage a lawyer familiar with co-op security from the start.
- Build extra time into closing or enforcement timelines.
- Prepare borrowers for higher up-front costs and a narrower pool of financing options.
The bottom line
Financing a co-op in Canada is possible, but it is not simple. Credit unions are the most consistent source of financing, though private lenders will sometimes fill the gap. Mainstream banks generally avoid the product.
For brokers, the key is setting realistic expectations, engaging legal experts early, and recognizing that co-op deals require more effort and carry more risk than standard mortgages. For borrowers, it is about understanding that co-ops can be affordable and appealing, but financing them demands flexibility, patience, and higher costs.
Our team collaborates with trusted legal advisors like Bill Denstedt to ensure clients understand the risks and mechanics of co-op financing. With careful planning and the right lender, these deals can sometimes be done.
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Last modified: October 1, 2025
