Every once in a while, we encounter financing requirements that do not meet molds, and the cooperative attribute is a perfect example. Unlike apartments or permanent homes, cooperatives have a unique ownership structure that complicates loans. Therefore, our experience makes credit unions the best choice for you to fund your co-op.
The buyer of the cooperative has not received registered ownership of the real estate. Instead, they own shares in the cooperative company, and an occupation agreement that gives them the right to reside in a specific unit.
This difference makes a huge difference. A regular mortgage relies on the lender’s ability to make allegations of ownership. With a cooperative, there is no such title, which means financing must be done in a different way.
How cooperative financing plays a role in practice
We asked Bill Denstedt of Looptra Nixon LLP for insight. Bill explained:
“Because they do not own the title, you cannot register for regular allegations. The usual approach is to commit to the borrower’s shares and any occupancy agreement tasks and register with the PPSA (Personal Property Safety Act) as safe. This makes the loan more like the personal property provided through the mortgage agreement and the personal property and rights provided to the land mortgage.”
In other words, cooperative loans are closer to secured personal loans than real estate financing. Security is usually registered through a common security agreement (registered in a common law province under PPSA, or under a similar instrument of the Quebec Civil Code.
The default remedies are also different. The bill states: “By default, your ability to achieve security depends on the sale of stocks and transfer occupancy rights. The cooperative board of directors usually has approval rights and can refuse, which can delay or even prevent implementation.”
Even if the loan-to-value ratio is low, execution is not direct. The role of the cooperative board of directors coupled with the limited sellability of the cooperative unit brings additional uncertainty to the lender.
Cooperation and financing in Canada
Although the basic challenges are nationwide, i.e. there is no registered mortgage, the popularity of cooperatives, management legislation and lender availability vary by province and region.
Here is a comparison of the appearance of Canadian cooperative financing:
Cooperation financing across Canada – Compare
| Province/territory | Prevalence of cooperatives | Legal framework | Lender’s Will | Key Challenges |
| Ontario | Gentle, especially Toronto | PPSA security, no registered mortgage loan | Some credit unions and private lenders, banks usually don’t | Board approval, resale restrictions, uncertain value, higher legal costs |
| British Columbia | Vancouver is relatively common | Cooperation Association Law, PPSA Security | Credit unions like Vancity or Coast Capital may raise funds, and banks usually avoid | Like Ontario, resale rules are capped in some cooperatives |
| Alberta | Rare, some in Calgary and Edmonton | PPSA Framework | Credit Union Support Limited | Small buyer pool, board of directors’ discretion, lender barely |
| Saskatchewan | Very rare | PPSA Framework | Credit Union only, case | Extremely liquid market, resale challenge |
| Manitoba | Rare, but in Winnipeg | PPSA Framework | Credit unions are more open than banks | Marketability issues, long law enforcement |
| Quebec | Most cooperatives in Canada, especially Montreal | Civil Code, not PPSA | Equity cooperatives are very limited, banks avoid | Most are nonprofit rental style cooperatives with strict resale controls |
| Nova Scotia | Some in Halifax | PPSA Framework | Credit unions and private lenders | Same risk as Ontario, with fewer lenders to choose |
| New Brunswick | rare | PPSA Framework | Credit Union only | Lack of sales comparisons, delayed executive board approval |
| Prince Edward Island | Extremely rare | PPSA Framework | Very limited options | Cooperatives are obscure, lenders lack experience |
| Newfoundland and Labrador | Very rare | PPSA Framework | The situation of credit unions | Similar to PEI, very easy to |
| Yukon | Almost no | PPSA Framework | No practical lender experience | Government or private solutions are more likely |
| Northwest Region | Almost no | PPSA Framework | Very limited | Like Yukon |
| Nunavut | No record | PPSA Framework | not applicable | Housing is mainly managed by the government, not based on cooperation |
Other risks and considerations
In addition to structural issues, cooperatives pose a practical challenge that brokers and borrowers must manage.
- Board of Directors Approved: Many cooperatives require consent before they can keep the stock safe and before the buyer can resell or approve the buyer by default.
- Resale restrictions: Some cooperatives may resell CAP resale prices to approved buyers pools. This reduces sales and complicates valuation.
- Liquidity risk: Even if the borrower defaults, lenders can face months or even years of delays, with the board of directors approving new buyers.
- Legal fees: Professional documentation is required, including GSA, PPSA registration and legal advice. Clients should expect efficient legal fees.
- Insurance and taxes: Cooperatives often charge property taxes through monthly fees. Lenders will need to be clear about the insurance liability of the building and personal content.
Broker and borrower list
Here is a practical guide for anyone considering cooperative financing in Canada.
Before you begin
- Confirm the type of cooperation. Is it a cooperative based on the resale value of equity or a non-profit leasing style? Non-equity cooperatives cannot raise funds.
- Identify the local credit union or niche lender willing to consider the deal. The five major banks rarely participate.
- Payments are expected to be between 20% and 35% due to unavailability of default insurance.
What cooperation committee should I ask
- Will the board of directors approve guaranteed shares as collateral?
- Are there any resale or transfer restrictions?
- How long does it take to approve a new buyer if stocks need to be sold?
Laws and Documents
- Review the cooperative’s charter, occupation agreement and financial statements with legal counsel.
- Prepare a general security protocol and PPSA or equivalent registration.
- Clarify insurance obligations between the company and its members.
Financial due diligence
- Review monthly expenses, preparatory funds and special assessment history.
- Confirm how to pay property tax.
- Understand any resale restrictions that affect value.
Warning Signs
- Slow or uncooperative cooperation board.
- Missing or inconsistent constitution and finance.
- It is not clear about the lender for cooperative loan mechanics.
Success tip
- From the beginning, hire lawyers who are familiar with cooperative security.
- Add extra time to the shutdown or execution schedule.
- Prepare for borrowers with higher upfront costs and narrower financing options.
Bottom line
Funding for cooperatives in Canada is possible, but it is not simple. Credit unions are the most consistent source of financing, although private lenders sometimes fill in the gap. Mainstream banks generally avoid using this product.
For brokers, the key is to set realistic expectations, attract legal experts as early as possible, and recognize that the efforts required by the cooperative require more effort and take more risks. For borrowers, understanding cooperatives can be affordable and attractive, but providing them with funding requires flexibility, patience and higher costs.
Our team works with trusted legal counsel such as Bill Denstedt to ensure clients understand the risks and mechanisms of cooperative financing. These transactions can sometimes be completed with careful planning and the right lender.
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Bill Denstedt
Last modified: October 1, 2025
