CECRA updates: Canada Emergency Commercial Rent Assistance Program

The Prime Minister and Minister of Finance today announced additional details on the Canada Emergency Commercial Rent Assistance Program (CECRA). There is now further clarity on who will be impacted and how, and we expect additional details in the coming days in terms of how the program will be operationalized.

  1. The program is intended to support certain commercial rent obligations for eligible small businesses, non-profit and charitable organizations during the period of April, May and June 2020
  2. An eligible small business has been defined as one paying less than $50,000/month in commercial rent and which has either ceased operations OR seen at least a 70 per cent drop in revenues compared to pre-COVID-19 levels.
  3. The form of assistance will include forgivable loans to eligible commercial property owners equivalent to 50 per cent of monthly rent payments during this time frame
  4. To qualify for the forgiveness on these loans:
    • Rent will have to be reduced by at least 75% by the commercial property owner during the period
    • The reduction must be provided under a rent forgiveness agreement, which includes a term not to evict the tenant while the agreement is in place

    In effect, the small business would remain responsible for the remaining 25%. From an economic impact standpoint, burden is shared equally by the small business and landlord (25% small business, 25% landlord (i.e. 100% – 50% forgiven- 25% from the tenant) with the remaining 50% shared by the Federal and Provincial governments.

  1. There is a requirement that the property be mortgaged. It appears as though the forgivable loans will be disbursed directly to the mortgage lender. This makes senses in some ways from a policy perspective as this relief would then backstop debt servicing by property owners while providing incentives for both parties (landlord and lender) to enter into and support the impact of forgiveness agreements. Conversely, a property owner without a requirement to service debt would otherwise be better off. Where that leaves small businesses who happen to rent a non-mortgaged property is unclear at this time, though the Federal and Provincial governments have urged all property owners to provide flexibility to tenants facing hardship during this time.
  2. The program will be delivered by the Canada Mortgage and Housing Corporation.
  3. This program is intended to be operational in mid-May, with retroactive application for April and May.

It is not clear whether non-forgivable loans will be available under this program for rent deferral agreements. No details were provided on rents between non-arm’s length entities, where one entity otherwise meets the criteria of an eligible small business. This program does not address residential rent obligations.

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