By Melissa Nowak
On April 16, 2020, the Canadian Government announced its intent to introduce the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. The program, which will provide loans to commercial property owners who lower or forgo rent from eligible small businesses, will be implemented through a partnership between the Federal Government and Provincial/Territorial Governments that govern landlord-tenant relationships.
On April 24, 2020, Ontario responded by announcing that it would commit $241 million to partner with the Federal Government to deliver more than $900 million in urgent relief to small businesses and their landlords through a new program called the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA).
OCECRA will provide forgivable loans to eligible commercial property owners experiencing potential rent shortfalls due to the economic impacts of the COVID-19 crisis on their small business tenants.
Currently, applications for this program are not yet open for acceptance. However, below is an overview of high-level details on the program and who is eligible. Please note, formal details of the program have not yet been released. Therefore, these details are subject to change and should be reviewed again, once the program officially begins to accept applications.
HOW DOES THE PROGRAM WORK?
The program is designed to share the cost between small business tenants and landlords. The responsibility for contracted rent would be allocated as follows for eligible participants in the program:
For the months of April (retroactively), May and June:
- Landlords would pay 25% of the before profit costs of a qualifying small business tenant’s monthly rent;
- Qualifying small business tenants would be required to pay 25% of their monthly rent;
- The Provincial and Federal Government would cost share the remaining 50% of the qualifying small business tenant’s monthly rent.
Conditions of the Program
- To receive the loan, property owners must reduce the rental costs of qualifying small business tenants for April to June 2020 by at least 75 per cent; AND
- The qualifying small business tenant and property owner must sign a rent forgiveness agreement.
Eligibility Requirements for Property Owners
- Commercial property can be a mixed-use, however, 30% of the property must be commercial;
- The applicant must be the registered owner and landlord of the property.
Eligibility Requirements for Small Business Owners
- The small business tenant’s monthly rent cannot exceed $50,000 in gross rent payments;
- The small business tenant must either (i) be a non-essential small business that has temporarily closed; and/or (ii) be experiencing a 70% drop in pre-COVID-19 revenues (determined by comparing revenues in April, May or June to the same month in 2019 or alternatively compared to average revenues for January and February 2020);
- Not-for-profit organizations and charitable entities can also be considered for the program.
At this point, property owners can apply for this program until September 30, 2020 and the loan will be retroactive to April, May and June 2020.
Stay tuned in, set your google alerts to Ontario-Canada Emergency Commercial Rent Assistance Program and contact Houser Henry & Syron LLP when the program opens to assist you with your application.
Houser Henry & Syron LLP is a business law boutique, experienced in commercial real estate, particularly leasing. In these uncertain times, please feel free to contact Melissa Nowak, Senior Associate at 416-860-8028 or at firstname.lastname@example.org for a preliminary consultation on any commercial real estate issue.
Since 1934, Houser Henry & Syron LLP has provided legal services to Canadian and foreign private businesses, helping them deal with complex legal challenges to grow and to manage risk successfully. We help our clients with mergers and acquisitions, commercial real estate, reorganizations, shareholders disputes and agreements, commercial agreements, employment issues and financing. We also pride ourselves in practising in Plain English.