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A covenant is a formal promise contained in a mortgage or registered against a property's title — either a borrower's personal covenant to repay the debt, or a restrictive covenant limiting how the land may be used.
The most common covenant a broker deals with is the personal covenant to repay: the borrower's promise, contained in the standard charge terms, to repay the mortgage debt. A guarantor or co-signer is typically adding their own covenant alongside the borrower's, which is what makes them legally responsible for the debt.
A restrictive covenant is a different thing entirely: a registered limitation on how a property can be used — for example, prohibiting commercial use or dictating building type — that runs with the land regardless of who owns it. Lenders and appraisers check the property's title for restrictive covenants during underwriting, since an unusual one can affect a property's marketability or its acceptability as security.
Two distinct meanings: a personal covenant is the borrower's promise to repay found in the mortgage or charge document; a restrictive covenant is a registered land-use limitation attached to title.
Standard-charge terms carry the repayment covenant: in most common-law provinces, the standard charge terms filed with the provincial land registry set out the borrower's covenant to repay along with the lender's other standard terms.
Guarantors and co-signers add their own covenant: when a guarantor or co-signer is added to a deal, they are taking on their own personal covenant to repay alongside the borrower's.
Quebec uses different terminology: under Quebec's civil-law hypothec, the underlying personal obligation to repay is structured differently from a common-law covenant, though the practical effect for the borrower is similar.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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