Syndicated vs. Non-Syndicated Lending: What’s the Legal Difference?

When it comes to alternative real estate investments in Canada, syndicated and non-syndicated lending are often mentioned in the same breath. But while both fall under the broader umbrella of private lending, they differ significantly in structure, regulatory oversight, and how investors participate in the lending process. Understanding the legal distinctions between them helps clarify the nature of the investment, the degree of involvement, and the compliance requirements attached.

The Private Lending Spectrum: A Quick Primer

Private lending in Canada exists on a spectrum:

• Syndicated Mortgages – a specific structure where multiple investors contribute funds toward a single large mortgage loan, often arranged through a mortgage broker.

  
  

• Mortgage Investment Corporations (MICs) – pooled investment vehicles offering diversified exposure to private mortgages, typically structured like funds.

  
  

• Individual Private Lenders – friends, family, or professionals lending their own money directly to a borrower.

While all three offer exposure to private real estate debt, they operate under different regulatory frameworks and structures.

What Is a Syndicated Mortgage?

A syndicated mortgage is when two or more investors pool their money to fund a single mortgage loan.  These structures are typically used in large-scale development projects such as condominium builds or commercial real estate, where the funding needs exceed what a single lender can offer. But may also cater smaller real estate exposure.

In Ontario, syndicated mortgages are governed by the Financial Services Regulatory Authority (FSRA), and only licensed mortgage brokers can facilitate these transactions. Syndicated mortgage investors earn interest based on their share of the loan, and in theory, risk is shared across the pool.

Syndicated mortgages are subject to specific compliance obligations, especially for "non-qualified syndicated mortgages" that involve higher risk, such as construction financing or subordinate mortgage positions. Regulatory reforms introduced in 2018 expanded disclosure and suitability requirements to better protect investors.

Key Advantages of Syndicated Lending

• Enables access to large-scale development projects

• Spreads risk among multiple investors

• Passive investment with limited management required

  
  

The Limitations of Syndicated Lending

• Complex deal structures and layered risks

• Priority of repayment may affect investor recovery

• Limited transparency in some offerings

  
  

What Is Non-Syndicated Lending?

Non-syndicated lending refers to a lending arrangement where an individual or small group of investors directly funds a mortgage loan. These loans are typically asset-backed and negotiated on a deal-by-deal basis, often secured by a first or second mortgage on real estate.

Non-syndicated lenders operate under the Mortgage Brokerages, Lenders and Administrators Act (MBLAA) and must be appropriately licensed in Ontario. These arrangements are common in short-term bridge financing, renovation projects, and other asset-based lending scenarios.

Investors in non-syndicated loans often have greater visibility into the specific terms of the deal and may be more directly involved in underwriting and structuring the investment.

Key Advantages of Non-Syndicated Lending

• High transparency and deal-level visibility

• Flexibility in structuring terms and involvement

• Clear security through registered mortgages

The Limitations of Non-Syndicated Lending

• Concentrated risk on a single borrower/project

• May require active due diligence and management

• Less diversification compared to pooled vehicles

What Are Mortgage Investment Corporations (MICs)?

MICs are federally regulated investment companies that pool funds from multiple investors to invest in a diversified portfolio of private mortgages. Investors purchase shares in the MIC, which then lends to borrowers across a range of property types and use cases.

MICs are required to distribute 100% of their net income to shareholders and are regulated by both the Income Tax Act and, in some cases, provincial securities regulators. MICs offer passive exposure to private lending with built-in diversification but typically do not provide deal-level transparency to individual investors.

Key Advantages of MICs:

• Built-in diversification across multiple loans

• Passive investment structure

• Regular income distributions

  
  

The Limitations of MICs:

• Limited transparency into individual loans

• Fund-level performance depends on manager decisions

• Less control over asset selection and loan terms

Comparison Snapshot: Syndicated, Non-Syndicated, and MIC Lending

Feature	Syndicated Lending	Non-Syndicated Lending	Mortgage Investment Corporations (MICs)
Number of Investors	Multiple investors	One or a few lenders	Pooled shareholders
Transparency	Varies by structure	High (deal-specific)	Low (pooled visibility)
Typical Use Case	Large-scale development	Bridge loans, renovations	Mixed-use lending portfolio
Regulatory Oversight	FSRA, MBLAA	MBLAA	CRA, Securities Regulation
Investor Role	Passive, shared investment	Direct involvement optional	Passive
Return Structure	Proportional interest income	Negotiated directly	Distributed net income
Diversification	Project-specific	Deal-specific	Portfolio-level
Suitability Requirements	Disclosure and suitability forms	Varies based on license/class	Typically retail or accredited

Choosing the Right Lending Structure

Syndicated, non-syndicated, and MIC lending each represent a unique approach to private mortgage investing in Canada. The differences lie in how capital is pooled, the level of investor involvement, and the corresponding legal and compliance frameworks. Understanding these structures allows investors to choose lending opportunities that align with their goals, risk tolerance, and preferred level of engagement.

As always, investors should seek legal and financial advice tailored to their situation. It’s not just about yield. It’s about knowing where your money goes, who it supports, and how it’s protected.