RESOURCES

As the COVID-19 pandemic continues, many commercial Landlords and Tenants have been negotiating and entering into rent deferral agreements and/or rent abatement agreements.

On April 24, 2020 the Federal Government announced the Canada Emergency Commercial Rent Assistance for small businesses (CECRA) to provide relief for small businesses experiencing financial hardship due to COVID-19. CECRA offers forgivable loans to eligible commercial property owners to reduce the rent owed by their impacted small business Tenants and to meet operating expenses on commercial properties. Further details were promised to be released around mid-May which has created some uncertainty and scepticism in the marketplace.

The following summarizes what has been released so far by the Federal Government:

• The Canadian Mortgage and Housing Corporation (CMHC) is to administer the CECRA program;
• the commercial property owner, to be eligible under the CECRA program, must own or be the Landlord of the commercial real property which is occupied by one or more impacted small business Tenants;
• “impacted small business Tenants” under the CECRA program are businesses — including non- profit and charitable organizations — that:
  • 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 experienced at least a 70% decline in pre-COVID-19 revenues.
• the Landlord must enter (or have already entered) into a rent reduction agreement for the period of April, May and June 2020, reducing the Tenant’s rent by at least 75%;
• the rent reduction agreement must include a moratorium on eviction for the period of April, May and June 2020;
• the Landlord must have declared rental income on its tax return (personal or corporate) for tax years 2018 and/or 2019;
• commercial properties with a residential component and multi-unit residential mixed-use properties would equally be eligible with respect to their impacted small business Tenants;
• CECRA doesn’t apply to any federal, provincial, or municipal-owned properties; and
• eligible Tenants who are in sub-tenancy arrangements could also eligible.

It is anticipated that the application process will open in the second half of May 2020. So far there has been a reluctance by many Landlords and Tenants to commit to a CECRA rent reduction agreement until the complete details and process is unveiled by the Federal Government.

Join our newsletter and don’t miss out on a blog post!

David H. Korman is a Partner at Kormans LLP. His practice areas include residential and commercial real estate transactions, commercial leasing and private and institutional lending. You can reach David at dkorman@kormans.ca. All blog entries are for your reading pleasure only and are not posted to provide legal advice. For your matter, we encourage you to consult with a lawyer to review and discuss your specific facts and circumstances. The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice. Kormans LLP cannot be responsible for the content of other sites. We expressly disclaim all liability with respect to actions taken or actions not taken based on content received from a third party website linked, directly or indirectly, to that of Kormans LLP.  The link to another site is not to be construed in any way as an endorsement of the host, the site or the information contained therein, nor is such link to be inferred as an association or affiliation with the host.