Canada Emergency Commercial Rent Assistance: Will Your Business be Eligible?
On April 24, 2020, Prime Minister Justin Trudeau announced an agreement in principle between the federal and provincial governments to provide rent relief to small businesses through the Canada Emergency Commercial Rent Assistance (“CECRA”) program.
While the Canada Emergency Response Benefit and other COVID-19 assistance programs have been praised for their efficient rollout, small businesses may find that accessing CECRA is not as straightforward.
WHAT IS CECRA?
CECRA is a program developed to provide commercial rent assistance to eligible small business tenants that have been economically affected by COVID-19 (“Tenants”). Through CECRA, Tenants could potentially receive a 75% rent reduction for the months of April, May and June of 2020.
HOW WILL CECRA WORK?
Under CECRA, the federal and provincial governments will provide forgivable loans to eligible commercial landlords/property owners (“Landlords”) to cover 50% of monthly commercial rent payable by their Tenants for the months of April, May and June of 2020.
For CECRA loans to be forgiven, Landlords will need to enter into agreements with their Tenants to:
- reduce rent by at least 75% for each of April, May and June; and
- place a moratorium on eviction for the same three-month period.
By entering into such agreements, Tenants will receive a significant rent reduction while Landlords will ensure that they receive partial payment of rents for April, May, and June 2020. If approved for CECRA, rent would be paid as follows:
- 50% by federal/provincial governments;
- 25% by the Landlord; and
- 25% by the Tenant.
The Canada Mortgage and Housing Corporation (“CMHC”) will administer and deliver CECRA, with the loans disbursed directly to Landlords through their mortgage lenders.
CECRA is expected to be available by mid-May, with rent reductions retroactive to April 1st, 2020.
Full details regarding the CECRA application process have not yet been released, but Landlords will have until September 30, 2020 to apply.
WHAT ARE THE CECRA ELIGIBILITY REQUIREMENTS?
To be eligible for CECRA, Landlords must:
- be the registered owner and landlord of commercial or mixed-use real property with at least a 30% commercial component; and
- enter into rent forgiveness or analogous agreement with eligible Tenants, whereby they agree:
- to reduce rent by at least 75% of the rent for fixed costs for April, May and June 2020; and
- to commit to a moratorium on eviction for these months.
To be eligible for CECRA, Tenants must:
- be paying rent of $50,000 or less per month; and
- be a non-essential business that has either temporarily ceased business operations or experienced at least a 70% reduction in pre-COVID-19 revenues.
In addition to for-profit businesses, non-profits and charitable organizations will also be eligible for CECRA.
As noted above, CECRA funds will be disbursed to Landlords through their existing mortgage lender. As such, CECRA funds only appear available to Landlords who have mortgages secured by their commercial real property. CMHC’s website states, however, that an alternative mechanism will be implemented for Landlords who do not have a mortgage.
Are Sublandlords Eligible?
Based on currently available information, sublandlords will not likely be eligible for CECRA, as they are not the landlord and registered owner of the commercial properties. The exclusion of sublandlords is significant since it will drastically limit the number of small businesses that are able to benefit from CECRA.
It is important to note that small businesses cannot unilaterally access CECRA as the CECRA application process rests with Landlords. At present, there does not appear to be a mechanism requiring Landlords to apply for CECRA.
Landlords, however, will need to think carefully before evicting and suing Tenants for unpaid rents while CECRA is available, as a refusal to apply for CECRA may allow Tenants in such situations to argue that the Landlord in question did not act in good faith or failed to properly mitigate their damages.
We will continue to provide details about CECRA as they become available. If you have questions about how CECRA may affect your business, please contact Brad Morton or another member of the Loopstra Nixon team.
 As of the date of this article no additional details have been released.