Real Estate and Construction

Canada Emergency Commercial Rent Assistance (CECRA)

Due to the COVID-19 health crisis affecting us all, the federal government in collaboration with its provincial and territorial partners recently announced Canada's Emergency Commercial Rent Assistance (CECRA).

Program Summary

The Canada Mortgage and Housing Corporation (CMHC) administers this assistance program on behalf of the Government of Canada and its provincial and territorial partners.

The CECRA is offering forgivable loans to eligible commercial property owners so that they can reduce the rent payable by their tenants who are small businesses (SMEs) affected by the effects of the COVID-19 crisis by at least 75% for the months of April, May and June 2020.

Program’s Aim

Since the CMHC and the federal government are currently working to finalize the details of this program, the following, announced by the CMHC, outlines how it will operate:

  • “The CECRA will cover 50% of the gross rent owed by impacted small business tenants during the 3-month period of April, May and June 2020;
  • The property owner will be responsible for no less than half of the remaining 50% of the gross rent payments (paying no less than 25% of the total);
  • The SME will be responsible for no more than half of the remaining 50% of the gross rent payments (paying no more than 25% of the total).”

Who is Eligible to Apply for the CECRA?

According to available information available from the CMHC, the property owner must meet the following requirements in order to be eligible for the CECRA:

  • “You own property that generates rental revenue from commercial real property located in Canada.
  • You are the property owner of the commercial real property where the impacted small business tenants are located.
  • You have a mortgage loan secured by the commercial real property, occupied by one or more small business tenants.*
  • You have entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce impacted small business tenant’s rent by at least 75%.
  • Your rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020.
  • You have declared rental income on your tax return (personal or corporate) for tax years 2018 and/or 2019.”

* For those property owners who do not have a mortgage, an alternative mechanism will be implemented. Further information will be outlined in the near future.

Which Small Business Tenants are Covered by the CECRA?

SMEs, including NPOs covered by the CECRA, must meet the following criteria:

  • “pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement),
  • generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level), and
  • have temporarily ceased operations (i.e. generating no revenues), or has experienced at least a 70% decline in pre-COVID-19 revenues.**

** To measure revenue loss, small businesses can compare revenues in April, May and June of 2020 to that of the same month of 2019. They can also use an average of their revenues earned in January and February of 2020.”

Agreement to Intervene Between the Owner (Landlord) and the Tenant (SME)

In accordance with the eligibility criteria outlined above, an agreement for each application must be reached between the landlord and the tenant who qualify with the CECRA.

We are in the process of drafting a template agreement that will be enhanced and completed when all the specific details of this program are available at the beginning of May 2020.


 

The information contained in this memo is taken from the CMHC website. This memo is not a legal opinion and each situation must be analyzed in the light of its own facts.

 

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