Updated April 30, 2020: This blog is an update to our previous blog of April 27, 2020. The Canada Mortgage and Housing Corporation (CMHC) has released further details on the Canada Emergency Commercial Rent Assistance program.

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. Commercial property owners include owners who own property which generates rental revenue from solely commercial tenants or a combination of commercial and residential tenants (updated).

What is the criteria for small business tenants?

For a qualifying commercial property owner to receive financial assistance from CECRA, the small business tenant:

  1. must be paying $50,000 in monthly gross rent per location pursuant to a valid lease agreement (updated);
  2. has temporarily ceased business operations OR has experienced at least a 70% reduction in pre-COVID-19 revenues (Revenue reduction may be calculated based on revenues of April, May and June of 2019 or the average of revenues from January and February of 2020 (updated)); and
  3. generates no more than $20 million in gross annual revenues on a consolidated basis (at the ultimate parent level) (It is not clear which year annual revenues are measured, but presumably it will be 2019) (updated).

Small business tenants also include not for profit and charitable organizations.

What are the other CECRA terms and conditions?

  1. The owner and the tenant must enter into a rent forgiveness agreement or similar agreement.
  2. 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.
  3. Owners would be eligible to receive forgivable loans from the government to cover up to 50% of 3 months' rent (April, May and June of 2020) of the applicable tenant.
  4. The owner's property must be mortgaged by a lender. The forgivable loans would be disbursed directly to the owner's lender. CMHC has confirmed that alternative criteria will be implemented for properties that are not mortgaged. The terms of those criteria are forthcoming (updated).
  5. The owner must have declared rental income on its tax return for the 2018 and/or 2019 tax years (updated).
  6. If gross rent has already been collected from the tenant for the qualifying months, a credit to the tenant for a future month's rent must be agreed upon between the owner and the tenant (updated).
  7. For CECRA loans to remain forgivable, owners are prohibited from seeking recovery for rent abatement amounts to tenants after CECRA program expires (updated).

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. The deadline to apply for CECRA is August 31, 2020 (updated).

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. Provinces and territories are likely introducing additional or supplemental terms. For example, the Province of Ontario has announced the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA) which will be administered by CMHC. The terms are substantially similar, although OCECRA appears to exclude certain small businesses not otherwise excluded by CECRA and be available for application until September 30, 2020. We will provide further updates on provincial rules once further details are released by each Province (updated).

Who will fund CECRA?

The federal government and applicable provinces or territories will fund 50% of the monthly rent for the applicable 3 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?

Further details on CECRA for small business tenants are expected to be announced soon as well as the launch of the formal application program. An additional rent forgiveness program for large business tenants which presumably pay more than $50,000 per month in gross rent is also expected to be announced soon (updated).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.