Canada Emergency Commercial Rent Assistance (CECRA) Program

Real Estate

Announced today by Justin Trudeau, was a new commercial rent assistance program aimed at helping small and medium-sized business to pay rent in the face of COVID-19 restrictions.

Limited specific details are available, but the government hopes to have the program up and running by mid-May which would mean that Landlords would have to make retroactive rent adjustments for April and May 2020 (if they haven’t already) and then a future rent adjustment for June 2020, to be eligible.

Here is some further information:

  1. In order to qualify for relief under the Canada Emergency Commercial Rent Assistance (CECRA) program, the following conditions must be met:
    1. Tenant pays less than $50K per month in commercial rent; and
    2. Tenant’s business is temporarily shut down or its revenues have decreased by 70% from pre-crisis levels.
  2. If a tenant qualifies, the federal government (through the CMHC) will secure a forgivable loan to the landlord equal to 50% of the monthly rent for April, May and June 2020.
  3. In order to receive the CECRA loan, the landlord must apply under the CECRA program, and meet the following conditions:
    1. The landlord must enter into a rent forgiveness agreement with the tenant under which the landlord agrees to reduce the rent for April, May and June 2020 by at least 75%
    2. The Landlord must also agree with the tenant on a moratorium on eviction for that three-month period.
  4. If the conditions are met, the federal government will forgive the loan and repay the lender directly. This will leave the landlord with a minimum 25% rent reduction for that three-month period. So, a Landlord cannot arrange with a tenant to a deferral of the entire remaining 50% (which many have been doing already), but only 25%

(ie. The government pays for 50%, the tenant pays for 25% and the Landlord assumes 25%)

One thing to note is there may be provisions in any existing mortgages granted by Landlords which likely would require consent from a lender before any rent forgiveness can be implemented or any additional security can be registered against the property (since the government will be registering security), which could get in the way of being able to obtain the loan under the CECRA.

No details have yet been provided with respect to how the government will test for the 70% revenue reduction of the tenant, but it is believed those rules will be similar to the previously announced CEWS (i.e. wage subsidy). 

As things are rapidly evolving in this area, please be sure to check back regularly for more information.

Erin Easingwood
Retired – Business Law
Lindsay Kenney LLP – Vancouver Office