Canada Emergency Commercial Rent Assistance (CECRA)
On April 24th, 2020 the Federal Government reached an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. This program will lower rent by 75 per cent for small businesses that have been affected by COVID-19.
The program will provide forgivable loans to qualifying commercial property owners to cover 50% of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.
Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID revenues. This support will also be available to non-profit and charitable organizations.
It is expected that CECRA will be operational by mid-May, and further details will be announced soon but the exact timing is still unclear, along with the details of the application process, how quickly businesses can get set up and other aspects of eligibility. Many small businesses are feeling a sense of urgency facing their commercial rents due on May 1st.
Concurrently, the Province of Ontario announced details of the Province’s new program for Ontario’s participation in CECRA called the “Ontario-Canada Emergency Commercial Rent Assistance Program” (OCECRA)
The following details were published on the Province of Ontario website on April 24th, 2020 and offers further specifics on the OCECRA program and a helpful example of how the program works. As of April 28th, 2020 at 1:30 pm no further updates have been released regarding CECRA or the OCECRA programs.
The Ontario Government is committing $241 million to partner with the federal government and deliver more than $900 million in urgent relief to small businesses and their landlords through a new program, the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA).
The OCECRA will provide forgivable loans to eligible commercial property owners experiencing potential rent shortfalls because their small business tenants have been heavily impacted by the COVID-19 crisis.
How does the program work?
The program has been developed to share the cost between small business tenants and landlords. Small business tenants and landlords would each be asked to pay 25 per cent of the before profit costs and the provincial and federal government would cost share the remaining 50 per cent.
For example, a monthly rent for a small business is $10,000. In this example, assume the landlord doesn’t make a profit. The landlord forgoes $2,500 (25 per cent of rent). The small business would be responsible for paying $2,500 (25 per cent of rent). The government would cover the remaining $5,000, with $3,750 from the federal government (37.5 per cent of rent) and $1,250 (12.5 per cent of rent) from the provincial government.
To receive the loan, property owners will be required to reduce the rental costs of small business tenants for April to June 2020 by at least 75 per cent. The loan would also be contingent on the signing of a rent forgiveness agreement between impacted tenants and landlords. This would also include a moratorium on evictions for three months.
How long would a commercial property owner have to apply for OCECRA?
The OCECRA would be administered by the Canada Mortgage and Housing Corporation (CMHC) and would be available until September 30, 2020. Support would be retroactive to April 1, covering April, May and June 2020.
Are there any eligibility requirements for commercial property owners?
The OCECRA would apply to commercial properties with small business tenants.
Commercial properties with a residential component, and residential mixed-use properties with a 30 per cent commercial component, would be equally eligible for support with respect to their commercial tenants.
The property owner must be the registered owner and landlord of the residential or commercial real estate property.
If a property owner does not have a mortgage secured by a commercial rental property, the property owner should contact CMHC to discuss program options, which may include applying funds against other forms of debt facilities or fixed cost payment obligations (e.g. utilities).
What are the eligibility requirements for small businesses?
An eligible small business tenant is one that:
- Pays monthly rent not exceeding $50,000 in gross rent payments; and is,
- A non-essential small business that has temporarily closed, or who is experiencing 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.
With the forced closure of all businesses deemed non-essential and the resulting loss of all business income these last 7 weeks, it’s been an extremely stressful and challenging time for most businesses as they struggle to meet ongoing overhead costs such as commercial rent and utilities. While the new CECRA and OCECRA programs should offer relief to some business, unfortunately many small businesses will be unable to benefit from these programs as many landlords are unwilling to voluntarily participate in the programs.
In my opinion, the program concept for rent relief is good yet the application and implementation is severely lacking since participation is purely a voluntary measure and up to each individual landlord. Meaning a large percentage of small businesses still can’t pay their rent and won’t benefit at all under this program.
Help is needed now for ALL small businesses! Personally, I dread the thought of all those who won’t make it thru this time and face the total loss of their businesses and their dreams through no fault of their own. If I can assist you in any way, please don’t hesitate to contact me here.
Stay safe and take good care, we will get through this!