We will try to keep you up to date with the latest announcements, both the Federal and Provincial Governments in coordination with the CMHC are working in hand to provide rental relief for Commercial Tenants. These programs are divided by the size of the companies through the measurement of income.
The Federal Government has announced forgivable loans to commercial property owners to reduce or forgive rent for April, May and June 2020.
UPDATE: New Guidelines Introduced by CMHC – Canada Emergency Commercial Rent Assistance Program
On April 29, 2020, Canada Mortgage and Housing Corporation (“CMHC”), which is the entity responsible for administering the Canada Emergency Commercial Rent Assistance (“CECRA”) program, provided additional clarification on the mechanics of the CECRA program. When the Federal government announced the CECRA program on April 24, 2020, many felt that it left many questions unanswered. Prime Minister Justin Trudeau stated that the CECRA program would be fully flushed out mid-May.
As part of the roll out of the CECRA program, the following is a summary of some additional details released by CMHC:
- Eligible Property Owners: To qualify for the CECRA, the owner of the property (the “Eligible Property Owner”) must:
- own property that generates rental revenue from commercial real property located in Canada;
- own commercial real property where an impacted small business tenant (“Impacted Small Business Tenant”) is located;
- have a mortgage loan secured by the commercial real property, occupied by one or more small business tenants;
- have entered or will enter into a rent reduction agreement for the period of April, May, and June 2020 (the “Relief Period”), that will reduce an Impacted Small Business Tenant’s gross rent by at least 75%, and such gross rent reduction agreement must include a moratorium on eviction for the Relief Period; and
- have declared rental income on its tax return (personal or corporate) for tax years 2018 and/or 2019.
- Impacted Small Business Tenants: Impacted Small Business Tenants 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 temporarily ceased operations (in essence, generating no revenues), or have experienced at least a 70% decline in pre-COVID-19 revenues.
- Calculations of Revenue Loss: 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.
- Retroactive Effect: The CECRA can be applied retroactively. Eligible Property Owners may still apply for assistance once the 3 month period has ended if they can prove eligibility during those months.
- Flexibility and Tenant Rent Credit: Eligible Property Owners must refund amounts paid by the Impacted Small Business Tenant for the Relief Period. For example, if gross rent has been collected at the time of approval for the CECRA, a credit to the Impacted Small Business Tenant for a future month’s gross rent (e.g. July 2020 for April 2020) is acceptable, if agreed upon by both the Eligible Property Owner and the Impacted Small Business Tenant. This can be a flexible 3-month period.