Canada Emergency Commercial Rent Assistance (CECRA)

May 25,2020 Leave a comment By Segal LLP

The Canada Emergency Commercial Rent Assistance (CECRA) is a program for landlords to provide incentives to reduce rent for certain small businesses (defined below).

The application portal is opened on May 25, 2020, at https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business

Property owners must offer a minimum of 75% rent reduction for the months of April, May and June 2020

Conditions of Landlord to Qualify

To qualify for CECRA for small businesses, the commercial property owner must:

own commercial real property* which is occupied by one or more impacted small business tenants
enter (or have already entered) into a legally binding rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%
ensure the rent reduction agreement with each impacted tenant includes:
- a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds, and
- a declaration of rental revenue included in the attestation The commercial property owner is not controlled by an individual holding federal or provincial political office.
CECRA will not apply to any federal-, provincial-, or municipal-owned properties, where the government is the landlord of the small business tenant.

Exceptions

Where there is a long-term lease to a First Nation or Indigenous organization or government, the First Nation or Indigenous organization or government is eligible for CECRA for small businesses as a property owner.
Where there are long-term commercial leases with third parties to operate the property (for example, airports), the third party is eligible as the property owner.
Also eligible are post-secondary institutions, hospitals, and pension funds, as well as crown corporations with limited appropriations designated as eligible under CECRA for small businesses.

NOTE: Small businesses that opened on or after March 1, 2020 are not eligible.

* The government defines commercial Real Property as a commercial property with small business tenants. Commercial properties with a residential component and multi-unit residential mixed-use properties would equally be eligible with respect to their small business tenants.

NOTE: Properties with or without a mortgage are eligible under CECRA for small businesses.

What is an impacted small business tenant?

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)
have experienced at least a 70% decline in pre-COVID-19 revenues **

NOTE: Eligible small business tenants who are in sub-tenancy arrangements are also eligible if these lease structures meet program criteria.

** Small businesses can compare revenues in April, May and June 2020 to that of the same period in 2019 to measure revenue losses. They can also use an average of their revenues earned in January and February of 2020.

How Does the Program Work

The program offers assistance by way of forgivable loans for the months of April, May and June 2020.

Property owners can apply later and the program will be applied retroactively.
Property owners may still apply for assistance once the 3-month period has ended if they can prove eligibility during those months. The end date for applications is August 31, 2020.
Property owners must use the funds from CECRA to refund amounts in excess of 25% paid by the small business tenant for the period or at the option of the impacted tenant apply rent paid in excess of 25% to future rent owing by the impacted tenant. ***

*** If rent has been collected at the time of approval, a credit to the tenant for a future month’s rent (i.e. July for April) is acceptable — if the tenant chooses this option. This can be a flexible 3-month period. The deadline to apply is August 31, 2020.

CMHC will provide forgivable loans to eligible commercial property owners. Funds will be transferred to the property owner’s financial institution.

The loans will cover up to 50% of the monthly gross rent owed by impacted small business tenants during the 3-month period of April, May and June 2020.
The property owner will be responsible for no less than half of the remaining 50% of the monthly gross rent payments (paying no less than 25% of the total).
The small business tenant will be responsible for no more than half of the remaining 50% of the monthly gross rent payments (paying no more than 25% of the total).

Note: If you are a tenant and struggling to pay the remaining portion of your rent, alternate programs are available to assist you.

Loan forgiveness

CECRA for small business loans will be forgiven if the property owner complies with all applicable program terms and conditions — including to not recover forgiven rent amounts when the program is over.

How do you Apply

As part of your application, you must provide a rent reduction agreement(s) and landlord and tenant attestations.

Taking a staggered approach

The government will be asking property owners to register on the following days once the application process has opened.

NOTE: Once registered, the portal will be available 24/7 for applicants to input data and upload documents.

Day	Who should register?
Monday	Property owners who are located in Atlantic Canada, BC, Alberta and Quebec, with up to 10 tenants who are eligible for the program
Tuesday	Property owners who are located in Manitoba, Saskatchewan, Ontario and the Territories, with up to 10 tenants who are eligible for the program
Wednesday	All other property owners in Manitoba, Saskatchewan, Ontario and the Territories
Thursday	All other property owners in Atlantic Canada, BC, Alberta and Quebec
Friday	All

What you Need to Apply

Property owners will need to provide information in support of their application, sign an attestation and agree to the terms and conditions of the loan agreement to be eligible for the program.

Property owner information

Property information includes: property address, property type, property tax statement, number of employees, latest rent roll for each property and the number of commercial units
Applicant information includes: banking information (including bank statement), property owner contact information, co-ownership information and contact details for co-owners

Tenant information

Tenant information includes: tenant contact information, registered business name, lease area and the monthly gross rent for the period of April, May and June 2020

We expect the process to evolve over time.

Please contact Segal LLP for any assistance required.