By Maïka Dion-Test and Louisa Kouretas

What to Expect with CMHC Real Estate Financing

Whether through lower interest rates, extended amortization options, or favorable financing ratios, CMHC-insured financing can be an attractive option in commercial real estate, particularly for multi-residential projects. While advantageous, this type of financing often comes with more stringent requirements than conventional financing. CMHC-insured financing is subject not only to the lender’s analysis, but also to CMHC’s own assessment in its capacity as insurer. Below are several key elements to keep in mind when structuring this type of financing.

The borrower’s corporate structure is one of the first elements examined. Both CMHC and the lender will want a clear understanding of the ownership structure, which must be accurately reflected in the organizational chart. The version submitted to the lender must be accurate, up to date, and disclose all direct and indirect ownership interests and relationships between entities, in order to avoid additional costs and delays. Some lenders may also require that both voting and participating shares be shown.

Another critical component is the rent roll. CMHC places particular importance on the consistency and accuracy of rental income. The rent roll must faithfully reflect the building’s operational reality and be kept up to date. It should include, among other things, lease commencement dates, the number and type of units and their sizes, and the services included in the rent. Any vacant or non-compliant units must be identified, and any leasing incentives must be disclosed. Any discrepancies between the rent roll, leases, and financial statements can raise concerns and undermine the credibility of the file. In a CMHC financing context, the objective is not merely to demonstrate income, but to demonstrate its stability and traceability. This is especially relevant where financing is sought under the MLI Select program or where rental income targets must be achieved.

For real estate portfolios or integrated projects, shared services and facilities agreements are another area developers often overlook. When a property relies on services, land, parking, premises, or other facilities or components located on or shared with another property, CMHC and the lender will want to ensure that the allocation of operating costs, maintenance responsibilities, and access rights are clearly governed by written agreements. If no such agreement exists, undertakings may be required, and the implementation of agreements or servitudes may become a condition precedent to loan disbursement.

It is also important to note that when a rental property is held as a condominium, the borrower must comply with all applicable condominium laws and regulations, even when a single owner holds and controls all units. This obligation includes compliance with the declaration of co-ownership, building management requirements, contingency and self-insurance fund regulations, and the obligations of the syndicate of co-owners. In practice, this means that even a condominium structure implemented primarily for structuring or zoning purposes must comply with the applicable legal framework.

In short, while CMHC financing offers particularly advantageous terms, it requires rigorous preparation in return. Developers and investors who approach the process with discipline and thorough documentation are more likely to experience a smoother approval process. Conversely, documentary deficiencies or inconsistencies can quickly become obstacles. Our team remains available to support you with your CMHC financing process.