After much deliberation the Government of Canada in partnership with the Provinces and Territories are taking action to provide relief to small business owners.
The CECRA will lower rent by 75% for small businesses that have been affected by COVID-19. Landlords are required to reduce the rent payable by the tenant to 25% of the rent that relates to fixed costs and to forgive the remaining 75% of the fixed-cost rent payable. In addition, landlords are required to enter into a written agreement with their tenant whereby it agrees to forgo any right to terminate the lease for a period of 3 months.
To be eligible for CECRA, a small business must have had revenue decline at least 70% from pre-COVID-19 levels or have been forced to close by pandemic restrictions.
Under these conditions, landlords can be approved for rent relief, if they agree not to evict the tenants and cut their rent by 75% for April, May and June. Then landlords will receive half of the tenant’s rent from the government, paid directly to their mortgage lender. However, it is not clear whether property owners must have a mortgage registered on title to the property in order to qualify for CECRA or whether government funds are distributed to property owners.
One big concern is that tenants can’t apply for rent relief on their own, because the program requires landlords to participate.
- The Canada Mortgage and Housing Corporation will administer and deliver the CECRA, a collaboration between the federal government and provincial and territorial governments, which are responsible for property owner-tenant relationships.
- 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.
- It is expected that CECRA will be operational by mid-May, with commercial property owners lowering the rents of their small business tenants payable for the months of April and May, retroactively, and for June.
- Further details on CECRA will be shared in the near future once final terms and conditions are available. The federal government and provincial and territorial governments urge property owners to provide flexibility to tenants facing hardship in this uncertain time.
- 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.
If you are a small business owner or a landlord of commercial property call Kesarwani Law Office and find out how we may be able to assist in resolving your commercial rent disputes amidst COVID-19.