On April 24, 2020, the federal government reached an agreement in principle with all provinces and territories to implement the CECRA program for qualifying small businesses. Prime Minister Justin Trudeau announced that morning that eligible small businesses affected by Covid-19 will be receiving 75% in rent relief. Those details along with further particulars from the Canada Mortgage and Housing Corporation (“CMHC”) include the following:
- Eligible Tenants. The commercial tenants eligible for this program will be those that are paying no more than $50,000 gross per month in rent AND have either temporarily ceased operations (i.e. generating no revenues) or have experienced at least a 70% drop in revenues. This will also include non-profit organizations.
- The maximum allowance of $50,000 in monthly gross rent must be evidenced by a valid and enforceable lease agreement.
- The tenant must generate no more than $20,000,000 in gross annual revenues, calculated on a consolidated basis at the ultimate parent level. Further details are expected to be released for larger businesses requiring rent relief.
- The 70% drop in revenues may be calculated by either (i) comparing revenues in April, May and June of this year to that of the same months of 2019; or (ii) based on an average of revenues earned in January and February of 2020.
- Eligible Landlords. In order for a landlord to participate in the program, the following requirements must be met. The landlord must:
- own the commercial property where the impacted tenant is located;
- have a mortgage loan which is secured by the relevant commercial property (CMHC has announced upcoming alternative measures for non-mortgagors); and
- have declared rental income on their tax return (personal or corporate) for tax years 2018 and/or 2019.
- Forgivable Loans. The CECRA will provide forgivable loans to qualifying commercial landlords to cover 50% of their monthly rent payments which are payable by the aforementioned eligible tenants.
- Forgiveness Agreement. The loans will be forgiven if the landlord agrees to reduce the eligible tenant’s rent by at least 75% under a rent forgiveness agreement. This agreement MUST include a term not to evict the tenant while this agreement is in place.
- Percentage Breakdown. Following the above, the landlord would be responsible for covering 25% of the gross rent, the tenant another 25%, with the remaining 50% shared amongst the federal and provincial governments. The forgivable loans will be disbursed directly to the mortgage lender.
- This program offers assistance for the months of April, May and June and is expected to be operational mid-May. However, this program can still applied for until the ultimate deadline of August 31, 2020. In this case, the landlord would either refund amounts paid by the tenant or credit the amounts for future month’s rent if agreed upon by the landlord and the tenant.
For questions regarding the CECRA program or other issues with your lease please contact one of Owen Bird’s commercial tenancy lawyers.