Canada’s Emergency Commercial Rent Assistance Program (CERCA)

On April 24, 2020, The Canadian Federal Government provided some details about the new Canada Emergency Commercial Rent Assistance program (CECRA) for small businesses and commercial landlords. The CECRA was announced on April 16, 2020 to provide relief for small business tenants and, in some respect, landlords.

Under the CECRA, the Federal Government will offer forgivable loans to the landlord equal to 50% of three monthly rent payments that are payable by eligible small business tenants who are experiencing financing hardship in April, May, and June. The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75%, with the remaining 25% or less covered by the tenant.

The forgivable loans would be disbursed directly to the landlord’s mortgage lender. If a landlord does not have a mortgage secured by a commercial rental property, different program options may be available, which may include applying funds against other forms of debt facilities or fixed cost payment obligations (e.g. utilities). More details are to come.

For landlords applying to the program, they are required to forgo their profits derived from rental income. The government will reimburse landlords for only their “before profit” rent. As well, landlords must enter into a formal “rent forgiveness agreement” with their tenant. This agreement must specify that the landlord is not allowed to evict the tenant for the three months of April, May, and June.

A small business tenant is a business paying less than $50,000 per month in rent and who has temporarily ceased operations or has experienced at least a 70% drop in pre-COVID revenues, comparing revenues of April, May, and June of 2020 to the same month in 2019, or alternatively compared to average revenues for January and February 2020.

For more information, please contact Jennifer Leve in the firm’s Toronto office at (416) 777-4043.