On April 24, 2020, the Prime Minister announced the federal government reached an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for qualifying commercial property owners and small business tenants.
While the full terms and conditions of CECRA are not yet available, the Prime Minister's Office has announced preliminary details, which are subject to change while intergovernmental agreements are finalized.
What is CECRA?
CECRA provides financial assistance to certain commercial property owners which provide rent forgiveness to small business tenants affected by the COVID-19 pandemic. The government will provide forgivable loans to qualifying commercial property owners who agree with eligible small business tenants to forgive rent by a minimum of 75% per month for the months of April, May and June of 2020.
Who is eligible to apply for and receive CECRA?
Currently, qualifying commercial property owners would apply for and receive financial assistance from CECRA when the program is launched.
What is the criteria for small business tenants?
For a qualifying commercial property owner to receive financial assistance from CECRA, the small business tenant: (i) must be paying $50,000 of rent or less per month; and (ii) has temporarily ceased business operations or has experienced at least a 70% reduction in pre-COVID-19 revenues. Small business tenants also include not-for-profit and charitable organizations. The current terms do not specify whether "rent" means base (net) rent or gross rent, but it is anticipated that it will mean gross rent.
What are the other CECRA terms and conditions?
- The owner and the tenant must enter into a rent forgiveness agreement or similar agreement.
- The loans would be forgiven if the owner agrees to: (i) forgive the tenant's rent by a minimum of 75% for the months of April, May and June of 2020; and (ii) not evict the Tenant during the months in which the rent forgiveness applies.
- Owners would be eligible to receive forgivable loans from the government to cover 50% of 3 months' rent (April, May and June of 2020) of the applicable tenant.
- The owner's property must be mortgaged by a lender. The forgivable loans would be disbursed directly to the owner's lender.
When will CECRA be available?
It is expected that CECRA will be available for application starting in mid-May 2020 with any rent forgiveness to be retroactive to April and May.
Who will administer CECRA?
CECRA will be administered by the Canada Mortgage and Housing Corporation (CMHC). It will be a collaboration between the federal, provincial and territorial governments.
Who will fund CECRA?
The federal government and applicable provinces or territories will fund 50% of the monthly rent for the applicable three months. Commercial property owners will be responsible for 25% and the tenants will be responsible for the remaining 25% unless otherwise agreed to between the owner and the tenant.
What is next?
More details on CECRA for small business tenants are expected soon as well as an additional rent forgiveness program for large business tenants which presumably pay more than $50,000 per month in rent.
