Canada Emergency Commercial Rent Assistance (CECRA)
If you are a commercial property owner or a small business tenant, I bet you have a lot of questions and concerns about the Canada Emergency Commercial Rent Assistance (CECRA) which was announced by the government on April 24, 2020.
As much as I would like to answer your burning questions, there is limited information available at this point. At the time of this post, my main concern/complaint about the program was the fact that it is not a direct rent relief to impacted small business tenants. Instead it Is a provision available to landlords only. I am hearing from numerous clients that their landlords have decided not to participate. If a landlord is receiving full rent during the pandemic then why would they go through the trouble of participating in CECRA? There are many small business owners who are shutdown but continue to pay their rent because of their vested interest in their location and it is a shame that they are left at the mercy of the landlords. . Do you think its unfair? Then please make sure you reach out to your local MP and make some noise to get this changed.
This is what I know about CECRA:
WHAT?
It will help eligible commercial property owners reduce or forgive rent for their small business tenants for the months of April, May, and June 2020 by 75%.
It will provide forgivable loans to qualifying commercial property owners to cover up to 50% of gross rent for the three monthly rent payments payable by eligible small business tenants experiencing financial hardship as a direct result of COVID-19.
The loans will subsequently be forgiven if the mortgaged property owner complies with all applicable program terms and conditions, including the agreement not to seek to recover rent abatement amounts after the program is over.
The small business tenant would be required to cover the remainder of the gross rent payments, up to a maximum of 25%.
WHO?
The CECRA for small business will provide forgivable loans to eligible commercial property owners, rather than.
In order to be eligible for the program, the property owner will be required to meet the following criteria:
- the applicant must own property that generates rental revenue from commercial real property located in Canada;
- the applicant is the property owner of the commercial real property where the impacted small business tenants are located;
- the applicant has a mortgage loan secured by the commercial real property occupied by one or more small business tenants;
- the applicant has entered or will enter into a rent reduction agreement for the period of April, May, and June, 2020, that will reduce impacted small business tenants’ rent by at least 75%;
- the rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May, and June 2020; and
- the applicant declared rental income on either their personal or corporate tax return for tax years 2018 and/or 2019.
For the purposes of determining eligibility, CMHC defines “impacted small business tenants or subtenants” to be businesses, including non-profit and charitable organizations, that:
- pay up to $50,000 per month in gross rent per location, as defined by a valid and enforceable lease agreement;
- generate no more than $20 million in gross annual revenues, calculated on a consolidated basis; and
- have temporarily ceased operations (that is, are generating no revenues), or have experienced at least a 70% decline in pre-COVID-19 revenues.
To determine the extent of the decline in revenues, a small business can use a comparison of revenues earned in April, May, and June 2020 to the same months in 2019, or to an average of revenues earned over the months of January and February 2020.
WHEN?
It is expected that the CECRA program for small business will be made available by mid-May.
The deadline to apply for the CECRA is August 31, 2020.
To learn more, visit this link
https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business