New Details about the Canada Emergency = Commercial=20 Rent Assistance Program and the Ontario-Canada Emergency Commercial Rent = Assistance Program
Download PDF =- Ski= nner,=20 Andrew J. =20 =20
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Industry Alerts =
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- Toronto=20
On April 24, 2020, the Federal Government provided some details = about=20 the Canada Emergency Commercial Rent Assistance program = (CECRA)=20 for small businesses and commercial landlords which had been announced = on April=20 16, 2020. The CECRA is intended to provide relief for small business = tenants and=20 in some respects, landlords. The CECRA will be delivered jointly by the = Federal=20 Government with each of the Provinces and Territories. In Ontario, the = CECRA=20 will be delivered through the Ontario-Canada Emergency Commercial Rent=20 Assistance Program (OCECRA). Under the OCECRA, the = Ontario and=20 Federal Government will offer forgivable loans to the landlord equal to = 50% of=20 the before-profit rent for landlords who reduce the tenant=E2=80=99s = monthly rent to 25%=20 of rent comprising =E2=80=9Cfixed costs=E2=80=9D for the months of = April, May, and June, 2020.=20 The landlord will be responsible for the remaining 25%.
In order to formalize the rent reduction, landlords must enter = into a=20 =E2=80=9Crent forgiveness agreement=E2=80=9D with their tenant. The = agreement is to provide a=20 moratorium on evictions for three months.
Landlords should note that by applying for this program, they = are=20 required to forego their =E2=80=9Cprofits=E2=80=9D derived from the = rental income. The=20 government will reimburse landlords for only their = =E2=80=9Cbefore-profit=E2=80=9D=20 rent.
The forgivable loans will be administered by Canada Mortgage = and=20 Housing Corporation (CMHC) and the funds will be = disbursed to=20 the mortgage lender of the commercial property owner. CMHC has indicated = it will=20 consider alternative loan forgiveness arrangements for landlords who = have no=20 mortgages, such as applying the forgivable loans to other forms of = =E2=80=9Cdebt=20 facilities=E2=80=9D or fixed cost payment obligations, such as = utilities.
Eligibility for Small Business = Tenants
For a tenant to be eligible under the OCECRA, the tenant=20 must:
- Pay monthly rent which does not exceed $50,000 in = =E2=80=9Cgross rent=E2=80=9D=20 payments; and be a nonessential small business that has = temporarily=20 closed, or that is experiencing a 70% drop in pre-COVID-19 revenues=20 (determined by comparing revenues in April, May, or June to the same = month in=20 2019 or alternatively compared to average revenues for January and = February=20 2020).
The following would not be considered a qualifying small = business under=20 the OCECRA:
- Entities owned by individuals holding political = office;
- Entities that promote violence, incite hatred or = discriminate on the=20 basis of race, national or ethnic origin, colour, religion, sex, age = or mental=20 or physical disability; and
- An entity in the =E2=80=9CLenders=E2=80=9D special accounts = or Restructuring Group=20 prior to March 1, 2020.
Not-for-profit organizations and charitable entities also = qualify for=20 the program.
Eligibility for Landlords
Eligibility for the OCECRA will extend to commercial properties = with a=20 residential component, and residential mixed-use properties with a 30%=20 commercial component but only with respect to the commercial = tenants.
In addition to the rent reduction requirement, property owners = must be=20 the registered owner of their property and the landlord of the = particular=20 tenant.
How to Apply
No details have been announced on how or when landlords can = apply for=20 the OCECRA, however, eligible landlords who qualify under the program = have until=20 September 30, 2020 to apply.
Remaining Questions
There are many unanswered questions with respect to the OCECRA. = It is=20 not clear for example, whether the program will require a prescribed = form of the=20 =E2=80=9Crent forgiveness agreement.=E2=80=9D Guidelines will be = required to indicate how=20 landlords calculate =E2=80=9Cpre-profit rent=E2=80=9D and =E2=80=9Cfixed = rent.=E2=80=9D
It will be interesting to see how this program will impact rent = due on=20 May 1st and the strategic approaches of both commercial = tenants and=20 landlords going forward.
Dickinson Wright=E2=80=99s team in Canada is available to = assist with=20 navigating this program.
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