Further to our previous blog post, additional information has been provided by the Canada Mortgage and Housing Corporation (CMHC) regarding the Canada Emergency Commercial Rent Assistance Program (CECRA). Details of this information can be viewed here.
Recapping our previous post, under the voluntary program, loans will be provided to qualifying commercial landlords to cover 50% of rent payments for April, May and June, 2020. For a tenant to qualify it must: (a) pay less than $50,000 a month in rent; and (b) either: (i) have experienced a decline in revenue of at least 70% from pre-COVID-19 levels; or (ii) have temporarily ceased business operations. The loans will be forgiven if the landlord agrees to reduce the tenant’s rent by at least 75% for these months under a rent forgiveness agreement, which must also include the Landlord’s agreement to not evict the tenant while the agreement is in place.
Type of Rent Relief
CMHC has now clarified that the rent relief granted under the program applies to gross rent.
Additional Eligibility Requirements
The CMHC also announced the following additional requirements that must be satisfied in order for a landlord to qualify for CECRA:
- The landlord must be the owner of the commercial real property where the impacted small business tenants are located. CMHC has not specified whether tenants under ground leases would qualify as “property owners” for the purposes of rent relief in favour of subtenants.
- The landlord must have a mortgage loan secured by the commercial real property, occupied by one or more small business tenants. For landlords who do not have a mortgage on their commercial property, CMHC noted that an alternative mechanism will be announced in the near future.
- The landlord must have declared rental income on its tax return (personal or corporate) for tax years 2018 and/or 2019.
In additional to the previously announced tenant eligibility requirements, a tenant must also generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level). It is not clear if the gross annual revenue will be measured over the 2019 calendar year. It also appears that the test for determining whether a tenant has temporarily ceased operations from its leased premises is that it is not generating any revenue.
CMHC also clarified:
- That a tenant’s revenue loss will be measured by either: (i) comparing revenues in April, May and June of 2020 to that of the same months of 2019; or (ii) using an average of the tenant’s revenues earned in January and February of 2020.
- The requirement that an eligible tenant must pay less than $50,000 in monthly rent applies to gross rent (and not basic rent) and this rent must be defined in a valid and enforceable lease agreement.
Additional information regarding CECRA:
Eligible landlords may still apply for assistance under the program once the 3-month period (being April, May and June) has elapsed, however they must apply before a hard deadline of August 31, 2020.
Any landlord who participates in the program must refund gross rent previously paid by the tenant for any portion of the 3-month period. If gross 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 agreed upon by both the landlord and the tenant.
No details have be announced as to how funds will be disbursed and how applicants can apply for the program, but CMHC says these details will be announced soon.
If you have any questions about CECRA, please contact any member of our Real Estate Group.
Peter chairs Lawson Lundell's Real Estate Group. His clients include pension funds, utility, mining and pipeline companies and private entities to whom he provides advice on a variety of real estate and corporate structuring ...
Andrew is an associate in the Real Estate Group. His practice focuses primarily on commercial leasing transactions. Andrew works with landlords, tenants and developers to draft and negotiate commercial leases and all related ...
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