April 24, 2020

The Federal Government announced today that they have reached an agreement in principle with all the provinces and territories to provide rent relief for small business owners affected by the COVID-19 pandemic.  The program is called the Canada Emergency Commercial Rent Assistance (CECRA) plan, and it has the potential to provide small business owners with relief equal to 75% of their rent costs for the months of April, May and June.

Here’s what we know so far:

  • The program will provide forgivable loans to qualifying commercial property owners to cover 50% of the rent payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
  • The loans will be forgiven if the landlord agrees to reduce the eligible small business tenants’ rent by at least 75% for that three-month period 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 of rent, up to 25% of the rent.
  • In order to qualify small businesses owners, as well as non-profits and charitable organisations, need to
    • be paying less than $50,000 per month in rent; and
    • have temporarily ceased operations or have experienced at least a 70% drop in pre-COVID-19 revenues.
  • The federal Canada Mortgage and Housing Corporation will administer and deliver the program.
  • Through the program the government is essentially agreeing to cover 50% of the rent costs of qualifying commercial tenancies, with tenants remaining responsible for 25% of the rent cost and landlords taking a loss on the remaining 25%.

While the program provides welcome relief for small business owners, there are still many unknowns and potential concerns.

One key concern is that it appears that the program will only apply to landlords who have mortgages on their properties, and landlords who do not have a mortgage on their property may not qualify.

The criteria to qualify for the program is still unclear, including in reference to which time period the 70% drop in pre-COVID-19 revenues will be calculated.

More information on the program can be found here. The Federal government stated that more details would be forthcoming over the next days to weeks.  It is expected, though not certain, that the program will be operational by mid-May. We will monitor the program and provide updates on our blog.

Landlords and tenants who have questions about the program and its implications for your business can contact Alon Segev at [email protected].

Disclaimer

The above blog post is provided for informational purposes only and has not been tailored to your specific circumstances. This blog post does not constitute legal advice or other professional advice and may not be relied upon as such.