What’s the hold up with rent assistance for small business, charities, and non-profits in Canada? In part it has to do with the way that Canada divides power between the federal and provincial government. While programs like the Canada Emergency Response Benefit could be rolled out quickly by a single government, rent relief is a little more complicated. The provinces are each responsible for property owner-tenant relationships within their jurisdiction, but a single pan-Canadian rent relief program is desirable under the circumstances.
We received more news today on the proposed collaboration between all the provinces, territories, and the federal government—the “Canada Emergency Commercial Rent Assistance” program (“CERCA”) which was originally announced on April 16th, 2020. This program will lower rent by 75 per cent for small businesses that have been affected by COVID-19, will be retroactive, and will be available to charities and non-profits. The new details announced today are as follows:
- The program will provide forgivable loans to qualifying commercial property owners to cover 50 per cent of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.
- It is expected that CECRA will be operational by mid-May, with commercial property owners lowering the rents of their small business tenant’s payable for the months of April and May, retroactively, and for June.
- The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 per cent for the three corresponding months under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25 per cent of the rent.
- Impacted small business tenants are businesses paying less than $50,000 per month in rent and who have temporarily ceased operations or have experienced at least a 70 per cent drop in pre-COVID-19 revenues. This support will also be available to non-profit and charitable organizations.
- The Canada Mortgage and Housing Corporation will administer and deliver the CECRA.
- Under a rent forgiveness agreement, which includes a moratorium on eviction, the mortgaged commercial property owner would reduce the small business tenant’s monthly rent by at least 75 per cent. The tenant would be responsible for covering 25 per cent, the property owner 25 per cent, while the federal government and provinces would share the remaining 50 per cent. The forgivable loans would be disbursed directly to the mortgage lender.
- Provinces and territories have agreed to cost share total costs and facilitate implementation of the program. They will cost share up to 25 per cent of costs, subject to terms of agreements with the federal government.[1]
Lex Klombies is
a charity and non-profit lawyer at Drache Aptowitzer LLP. She can be reached
at LKlombies@drache.ca.
[1]“Prime Minister announces partnerships with provinces and territories to deliver the Canada Emergency Commercial Rent Assistance for small businesses”, April 24, 2020: https://pm.gc.ca/en/news/news-releases/2020/04/24/prime-minister-announces-partnerships-provinces-and-territories