Prime Minister Announces Canada Emergency Commercial Rent Assistance (CECRA)

On April 24, 2020 Prime Minister Justin Trudeau announced that the federal government and the provinces and territories have agreed in principle on an optional new program, called Canada Emergency Commercial Rent Assistance (CECRA), to help commercial tenants and landlords deal with financial hardships arising from the Covid-19 crisis.

The program, which will be administered by the Canada Mortgage and Housing Corporation, is expected to be operational by mid-May in B.C.  Further details will be made available soon, but following are the basic elements of the program:

• A landlord of mortgaged commercial property will be eligible to receive a loan from the government equal to 50% of an eligible tenant’s usual rent for the months of March, April and May, 2020 if the landlord enters into a rent forgiveness agreement with the tenant.
• The rent forgiveness agreement must provide that (i) the tenant’s rent is reduced by at least 75% for the months of April, May and June, (ii) the tenant is responsible for paying the remainder, up to 25%, and (iii) the landlord will not evict the tenant during such period.
• The loan to the landlord will be forgiven and paid directly to the landlord’s lender.
• To be eligible, tenants must pay less than $50,000 per month in rent and either have ceased operations temporarily or experienced at least a 70% decrease in revenues due to the Covid-19 crisis. In addition to businesses, not-for-profit and charitable organizations will also be eligible.  (The Prime Minister also stated that assistance for tenants paying more than $50,000 per month in rent will be available, with details to follow.)

Some key questions presumably will be answered when details of the program are disclosed, including whether the program applies to gross or net rent and when loans will actually be paid to landlords.

While welcomed by many, the program has been strongly criticized by others who argue that, from a tenant’s perspective, a blanket moratorium on commercial evictions should have been implemented, the program should not rely on landlords’ cooperation, and the 70% revenue decrease requirement is too severe, and, from a landlord’s perspective, the program is prejudicial to landlords without mortgages and does not provide for recovery of any of the 25% of rental income lost by landlords.

Still, if perfection is the enemy of the good –especially in a crisis — the program appears capable of delivering significant help to some of the hardest hit small businesses and organizations in the country, provided it is rolled out quickly and administered efficiently.  The fact that the federal, provincial and territorial governments were able to come to agreement on the main features of the program is impressive, considering the number of urgent priorities they are facing.

If you have any questions or feel that you have an urgent and essential matter, please contact our office.

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