Federal Government Announces 75% Rent Relief for Small Businesses Impacted by COVID-19

KPA Lawyers – April 28, 2020

Canada Emergency Commercial Rent Assistance Program

Prime Minister Justin Trudeau announced on February 24, 2020, that the Federal Government will provide relief to businesses unable to pay their landlords due to the COVID-19 pandemic. The Federal Government has reached an agreement with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses which will reduce rent by 75 percent.

CECRA will provide forgivable loans to qualifying commercial property owners which will cover 50 percent of rent payments for small business tenants experiencing financial hardship during the months of April, May and June.

These loans will be forgiven conditional upon the mortgaged property owner agreeing to reduce eligible small business tenants’ rent by a minimum of 75 percent for the three corresponding months under the rent forgiveness agreement. This forgiveness agreement will also include a terms to ensure these commercial tenants are not evicted while this agreement is in place. The small business tenants are required to cover the remaining 25 percent of their lease.

Those small businesses paying less than $50,000 monthly in rent and have temporarily ceased operations will have to prove they are experiencing a minimum 70 percent reduction compared to pre-COVID-19 revenues. This support will also be available to non-profit and charitable organizations and will be administered and delivered by the federal Canada Mortgage and Housing Corporation (CMHC). The CMHC subsidy will be available until September 30th, 2020 and the support will be retroactively backdated to cover April, May, and June 2020.

Ontario-Canada Emergency Commercial Rent Assistance Program

The Ontario Government has budgeted $241 million in its partnership with the Federal Government and will deliver more than $900 million in urgent relief to small businesses and their landlords through their new program, the Ontario-Canada Emergency Commercial Rent Assistant Program (OCECRA). The purpose of OCECRA is to allow for cost-sharing between small business tenants and landlords.

For example, let’s suppose a monthly rent payment for a small business is $20,000. Assuming the landlord does not make a profit, the landlord will forego $5,000.00 (25 percent of the rent). The small business would be responsible for paying $5,000.00 (25 percent of the rent). The Government would then subsidize the remaining $10,000, with $7,500.00 from the Federal Government (37.5 percent of the rent) and $2,500.00 (12.5 percent of the rent) from the respective Provincial Government.

Commercial properties with a residential component, and residential mixed-use properties with a 30 percent commercial component, would be equally eligible for this support. This would be conditional upon the property owner being the registered owner and the landlord of the residential/commercial real estate property. If a property owner does not have a mortgage secured by a commercial rental property, the property owner can contact CMCH to discuss the program options available to them. This may include funds against other forms of debt facilities or fixed cost payment obligations, such as utilities.

The forgivable loans would be conditional on the property owner and tenant entering into a rent forgiveness agreement pursuant to which the property owner would reduce the tenant’s monthly rent by 25 percent of rent that relates to the fixed costs for three months. The property owner would be responsible for the remaining 25 percent. Government funding and remaining monthly tenant rent payment obligations would not cover the property owner’s profits derived from the rental income, if the property owner agrees to forego profit for a three-month period.

Businesses Excluded from the OCECRA Program

The following exclusions would apply:

1. Entities owned by individuals holding political office;

2. Entities that promote violence, incite hatred or discriminate on the basis of race, national or ethnic origin, color, religion, sex, age or mental or physical disability; and

3. An entity in the Lenders special account of Restructuring Group prior to March 1, 2020.


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