The federal government announced new rent relief measures, the Canada Emergency Commercial Rent Assistance (CECRA) program. It will be rolled out and be operational by May 15, 2020. The Canada Mortgage Housing Corporation (CMHC) is the federal organization that has been mandated to administer the CECRA program in partnership with the provinces.
The aim of the program is to provide the necessary financial assistance to make sure that small businesses are able to pay their rent, so they are not behind their lease obligations when they go back to work.
How does the program work?
The program offers forgivable loans to eligible commercial property owners so that they can reduce the rent owed by their impacted small business tenants by at least 75% for the months of April, May, and June 2020 due to the full or partial shutdown as a direct result of COVID-19.
When is the loan forgiven?
The loan will effectively be forgiven when the landlord complies with the program’s terms and conditions, which primarily include not seeking from impacted tenants 75% of the monthly rent once the program ends.
Who is eligible?
To qualify for CECRA for small businesses, the property owner must meet the following requirements:
- Property owned must generate rental revenue from commercial real property located in Canada, declared on personal or corporate tax returns for taxation years 2018 and/or 2019.
- Commercial real property owned where the impacted small business tenants are located.
- Landlord has a mortgage loan secured by the commercial real property, occupied by one or more small business tenants.
- Landlord has entered or will agree to enter into a rent reduction agreement for the period of April, May, and June 2020, which will reduce impacted small business tenant’s rent by at least 75%.
- The rent reduction agreement with impacted tenants includes a non-eviction condition during the months of April, May, and June 2020.
- If a property owner does not have a mortgage, an alternative mechanism will be implemented and further information will be outlined in the near future.
- The tenants are:
- Small business tenant or subtenant
- Multi-unit residential properties with commercial tenants
How to identify an impacted small business tenant/subtenant?
Impacted small business tenants are businesses, including non-profit and charitable organizations who:
- Pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement),
- Generate a maximum $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level), and
- Have temporarily ceased operations (i.e. generating no revenues), or have experienced at least a 70% decline in pre-COVID-19 revenues. To measure revenue loss, small businesses can compare revenues in April, May, and June of 2020 to that of the same month of 2019 or they can use an average of their revenues earned in January and February of 2020.
How to apply?
Program details including how funds will be disbursed and how to apply are being finalized and will be available as of May 15, 2020. Since the CMHC will be responsible for the application process, it would be important to register with them prior to May 15, 2020, in order to be directed to the website to apply as soon as the program is launched, since only online applications are accepted.
We will continue to monitor the relevant details on how to apply and will provide you with timely updates.
We strongly encourage our clients, whether they be small business tenants or property owners to contact your RSW advisor to determine if you can benefit from this program and how to go about it as well as to register with the CMHC at the following link https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business