CECRA provides financial assistance to certain commercial property owners which provide rent forgiveness to small business tenants affected by the COVID-19 pandemic. The rent relief plan, to be funded jointly with the provinces, will provide non-repayable loans to commercial property owners to cover 50% cent of rent payments for April, May and June of 2020.
Qualifying commercial property owner to receive financial assistance from CECRA, the small business tenant:
- Must be paying $50,000 of rent or less per month; and
- Has temporarily ceased business operations or has experienced at least a 70% reduction in pre-COVID-19 revenues.
- The owner and the tenant must enter into a rent forgiveness agreement or similar agreement.
- The program will allow the property owners renting space to these businesses to obtain a forgivable loan from the Canada Mortgage and Housing Corporation that will cover 50% of their rent for the period of April, May and June.
- In exchange, property owners must sign an agreement
- Committing them to lowering the rent their tenants pay by at least 75% over the same period, and
- Must agree not to evict their tenants during the months in which the rent forgiveness applies.
- The owner's property must be mortgaged by a lender. The forgivable loans would be disbursed directly to the owner's lender.
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.
CECRA will be administered by the Canada Mortgage and Housing Corporation (CMHC). It will be a collaboration between the federal, provincial and territorial governments.
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.
The program has been developed to share the cost between small business tenants and landlords. Small business tenants and landlords would each be asked to pay 25% of the before profit costs and the provincial and federal government would cost share the remaining 50%.
To receive the loan, property owners will be required to reduce the rental costs of small business tenants for April, May and June 2020 by at least 75%.
The loan would also be contingent on the signing of a rent forgiveness agreement between impacted tenants and landlords. This would also include a moratorium on evictions for three months.
The OCECRA would be administered by the Canada Mortgage and Housing Corporation (CMHC) and would be available until September 30, 2020. Support would be retroactive to April 1, covering April, May and June 2020.
The OCECRA would apply to commercial properties with small business tenants.
Commercial properties with a residential component, and residential mixed-use properties with a 30% commercial component, would be equally eligible for support with respect to their commercial tenants.
The property owner must be the registered owner and landlord of the residential or commercial real estate property. If a property owner does not have a mortgage secured by a commercial rental property, the property owner should contact CMHC to discuss program options, which may include applying funds against other forms of debt facilities or fixed cost payment obligations (e.g. utilities).
An eligible small business tenant is one that:
- Pays monthly rent not exceeding $50,000 in gross rent payments; and is,
- A non-essential small business that has temporarily closed, or who is experiencing a 70% drop in pre-COVID-19 revenues (determined by comparing revenues in April, May or June to the same month in 2019 or alternatively compared to average revenues for January and February 2020).
Not-for-profit organizations and charitable entities would also be considered for the program.
The forgivable loan would be conditional on the property owner and tenant entering into a rent forgiveness agreement (including a moratorium on eviction for three-months) pursuant to which the property owner would reduce the tenant's monthly rent to 25% of rent that relates to fixed costs for three months.
The property owner would be responsible for the remaining 25%. For certainty, government funding, and remaining monthly tenant rent payment obligations (i.e. 25%), would not cover the property owner's profits derived from rental income - that is, in applying for this program, the property owner agrees to forego profit for a three-month period.
The following exclusions would apply:
- Entities owned by individuals holding political office;
- Entities that promote violence, incite hatred or discriminate on the basis of race, national or ethnic origin, color, religion, sex, age or mental or physical disability; and,
- An entity in the Lenders special accounts or Restructuring Group prior to March 1, 2020.
