The CECRA Program: What you Need to Know
Commercial Rent Relief and the Canada Emergency Commercial Rent Assistance Program
Who this resource is for:
Individuals seeking further information about the CECRA program. The Canada Emergency Commercial Rent Assistance (CECRA) program is for small businesses affected by COVID-19. The program will offer forgivable loans to eligible commercial property owners who in turn will lower or forgo the rent of small businesses tenants for the months of April (retroactive), May, and June.
Who created it: © Grant Haddock and Pacific Legal Education and Outreach Society, May 2020. Called to the Bar of British Columbia in 1992, Grant Haddock established Haddock & Company in 2001. Grant’s preferred areas of practice are corporate housing law (including non-profit), strata property law, commercial and residential tenancy and construction law.
Presented by Grant Haddock:
How Does CECRA Work?
Administered through the Canada Mortgage and Housing Corporation (CMHC), the CECRA offers rentassistance to eligible small business tenants for the months of April, May and June 2020 by providing forgivable loans to eligible commercial property owners to cover 50% of the rent payments. The CECRA can be applied retroactively. If rent has been collected at the time of approval, the property owner must refund the amounts paid by the small business tenant or apply a credit to the tenant for a future month’s rent.
The loans will cover 50% of the gross rent owed during the three-months. The property owner will be responsible for no less than 25% of the gross rent owed and the small business tenant will be responsible for covering the remaining 25% of the rent (paying no more than 25% of the total).
The loans will be forgiven if the property owner complies with all applicable program terms and conditions including to not seek to recover rent abatement amounts after the program is over
Who is Eligible?
To qualify for the CECRA, the property owner must meet the following requirements:
the property owner owns commercial property that generates rental revenue (the “Property”);
the Property is located in Canada;
there are impacted small business tenants occupying and renting the Property;
the property owner has entered or will enter into a rent reduction agreement for the periods of April, May and June 2020, that will reduce impacted small business tenants’ rent by at least 75% (the “Rent Reduction Agreement”);
the Rent Reduction Agreement with impacted tenants includes a moratorium on eviction for the periods of April, May and June 2020;
the property owner has declared rental income on their tax return (personal or corporate) for tax years 2018 and/or 2019; and
there is a mortgage loan secured by the Property.* * An alternative mechanism will be announced in the near future for property owners who do not have a mortgage loan securing the Property.
What is an Impacted Small Business or Subtenant? Impacted small business tenants include non-profit and charitable organizations who:
pay less than $50,000 per month in rent per location;
generate no more than $20 million in gross annual revenues (calculated at the ultimate parent level); and
have temporarily ceased operations or have experienced at least a 70% decline in pre-COVID-19 revenues.
To determine revenue decline, revenues in April, May and June of 2020 can be compared to that of the same month of 2019, or the average revenue earned in January and February of 2020 may be used.
Application Process The deadline to apply is August 31, 2020. It is expected that the CECRA will be operational by mid-May. More information about the program including how the funds will be disbursed and how to apply are currently being finalized. More information will be available here.
Additional Resources:
Webinar Q&A:
Q: Has there been any judicial consideration of the term “gross rent”?
A: I haven't looked that up. However, I anticipate that if I did look it up, I would find that it is contract specific. I would anticipate that every question about what “gross rent” is would turn on the terms of the contract itself.
Q: What if you do not know who the actual property owner is? For example, what if the property owner is a numbered company?
A: You can do a property search through B.C. Online which is instant. The property search will provide you with a public title which will tell you who the owner is. Next you can do a company search, which will give you the actual registered address of the company along with director and officer names and likely the name of the company’s law firm. If you’re dealing with a limited partnership, it will be owned by a company, and then you have to go down the line to see who you’re dealing with. If the owner is a trust, there is no way to find out who is involved, so it may be a dead end but you can send demand letters to the trust. When these types of companies are the property owner, I would imagine that it might be difficult to receive rent relief.
Q: Does the mortgage have to be on the building the tenant is in?
A: It appears that the mortgage has to be on the building that the tenant occupies, but more information might be released on that later.
Q: How does CECRA operate when there are sublease agreements?
A: It doesn't matter if you have a sublease, a sub-sublease or so on as long as the requirements of CECRA are met.
Q: Is the 50% coverage of the cost of the mortgage or the cost of what the landlord charges for rent?
A: The cost of what the landlord charges for rent. This will depend on the definition of “gross rent”.
Q: Does it matter if the property owner is a non-profit society?
A: No. The property owner just needs to meet the requirements of CECRA.
Q: If the property owner isn't interested in applying for CECRA, what can tenants do?
A: Nothing right now. The program is completely voluntary for the property owner. The only thing a tenant could do to put pressure on the property owner to apply is to go to the media. If your operation is community driven or an asset to the community, media exposure might work.
Q: What if a non-profit is running out of a space that is not zoned for how it is being used? Or if they do not have a business license?
A: I don't think anyone is watching that. Further, the application process does not require any information on how the premises is being used or what it is zoned for.
Q: Has the city of Vancouver given rent deferral or rent abatement to its tenants or has anyone taken it upon themselves to seek this out?
A: I have heard anecdotally from one tenant that the City of Vancouver is not requiring it to pay rent at the moment. All of the tenant’s revenue revolves around hosting large crowds so they are completely prevented from carrying on operations. It is unclear if the City will forgive the debt incurred.