The federal government recently promised the creation of the Canada Emergency Commercial Rent Assistance program ("CECRA") to help small businesses with commercial rent payments for the months of April, May, and June 2020. On April 24, 2020, Justin Trudeau announced that the federal government had reached an agreement in principle with all provinces and territories to create and implement CECRA.
How Will CECRA Work?
- If a small business tenant is eligible under CECRA and its qualifying commercial landlord agrees to participate in the program, then responsibility for rent for the months of April, May and June 2020 will be apportioned as follows:
|
Entity Responsible for Rent |
Percentage of Rent |
|
Eligible small business tenant |
25% |
|
Qualified property owner |
25% |
|
Federal government |
37.5% |
|
Provincial government |
12.5% |
The program will provide forgivable loans to qualifying commercial property owners to cover 50 per cent of three "pre-profit" monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June. Government funding, and remaining monthly tenant rent payment obligations (i.e. 25 per cent), would not cover the property owner's profits derived from rental income. In applying for this program, a qualifying commercial property owner agrees to forego profit for a three-month period.
- The forgivable loans would be disbursed directly to the mortgage lender of a qualifying commercial property owner. If a property owner does not have a mortgage secured by a commercial rental property, the property owner should contact the Canada Mortgage and Housing Corporation (which will be tasked with administering the program) to discuss program options, which may include applying funds against other forms of debt facilities or fixed cost payment obligations (e.g. utilities).
What is an "eligible small business tenant"?
- "Eligible small business tenants" must meet the following criteria:
- pay less than $50,000 per month in gross rent; and
- be a non-essential business that has temporarily closed or that has experienced at least a 70 per cent drop in pre-COVID-19 revenues (determined by comparing revenues in April, May or June to the same month in 2019 or alternatively compared to average revenues for January and February 2020).
Not-for-profit organizations and charitable entities would also be considered for the program.
What is a rent forgiveness agreement?
- Commercial landlords and tenants must agree to enter into "rent forgiveness agreements" in order to participate in the program. The agreements must include the following terms:
- a landlord agrees to reduce the tenant's rent by at least 75 per cent for April, May and June; and
- a landlord agrees not to evict the tenant during those three months.
How long will the program run?
It is expected that CECRA will be operational by mid-May and be available until September 30, 2020. Support would be retroactive to April 1, 2020 covering April, May and June 2020.
When will more information become available?
The federal government promised to share further details in the "near future". We will keep you posted. In the meantime, further information can be found now in federal and provincial press releases at the following links:
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.