What is the difference between a recourse and non-recourse commercial mortgage in Ontario?

A recourse commercial mortgage lets the lender pursue the borrower personally, and any guarantors, for a shortfall if the property is sold on default and doesn't cover the full amount owing. A non-recourse mortgage limits the lender's remedy mainly to the property itself as security, meaning that if the property's value doesn't cover the debt on default, the lender generally can't chase the borrower's other assets for the difference, subject to standard exceptions.

Those exceptions matter: even non-recourse loans typically carry carve-outs that restore personal liability in specific bad-faith situations, such as fraud, misrepresentation, or environmental contamination the borrower caused or knew about. So non-recourse doesn't mean there's no personal risk at all; it means the risk is narrowed to specific circumstances rather than a general shortfall.

Non-recourse structures are more common in larger, institutional commercial financings, while recourse loans remain more typical for smaller or private commercial mortgages, where lenders want the added protection of being able to pursue the borrower directly. Borrowers negotiating financing should understand exactly which structure applies and what carve-outs exist, since the difference materially changes personal risk exposure if a deal goes wrong.