Real Estate 2022: Trends and Developments
Introduction Quebec’s commercial real estate industry will remember 2021 as both a year of COVID-19 clampdowns and a year of consi...
On May 25th, applications for the Canada Emergency Commercial Rent Assistance (“CECRA”) for small businesses became available.
This program is an opportunity for tenants to obtain financial relief in order to confront difficulties caused by the current COVID-19 pandemic. Due to the various health measures implemented by both provincial and federal governments, many businesses were forced to close and suffered a significant loss in revenue. Rental obligations for many businesses were difficult, if not impossible to meet, both for small and medium businesses. Consequently, commercial property owners are also partaking in the financial struggle as they are often deprived of rental payments, while continuing to be responsible for mortgage payments, real estate taxes, insurance, security, maintenance and many other financial obligations.
In response to this challenging situation, the federal government launched the CECRA in order to attempt to provide a second wind to small businesses and commercial property owners. This program, administered by the Canada Mortgage and Housing Corporation, is intended for commercial property owners and aims to relieve the small businesses of 75% of their rent obligations. In order to achieve this goal, the CECRA program offers unsecured and forgivable loans to eligible commercial property owners, regardless if they have a mortgage on their property or not. CECRA’s loans cover half (50%) of monthly rent that are payable by eligible small businesses that are suffering financial losses for the period of April, May and June 2020 (“the Relevant Period”). CECRA’s loans will be forgiven if the eligible commercial property owner agrees to reduce the rent owed by impacted small business tenants during the Relevant Period. Such reduction needs to be at least 75% of the monthly rent.
In order to be eligible, a commercial property owner must enter into a legally binding rent reduction agreement for the Relevant Period reducing an impacted small business tenant’s rent by at least 75%. The rent reduction agreement must contain a moratorium on eviction for the Relevant Period and a declaration of rental revenue. Other specific criteria also apply.
An eligible small business is any business, including non-profit and charitable organizations that pay no more than $50,000 in monthly gross rent per location, generate no more than $20 million in gross annual revenues, has temporarily ceased operations or has experienced at least a 70% decline in pre-COVID-19 revenues.
If you are a commercial property owner and one or more of your tenants is struggling with rent payments because of the current COVID-19 restrictions, the CECRA is an excellent opportunity to face that challenge. Given that participation by a landlord in the CECRA is voluntary, it is up to each landlord to determine if the program is beneficial for them. Indeed, participation to CECRA implies that the landlord covers for 25% of the monthly rent. If you wish to have more information and assistance regarding the CECRA, we invite you to contact us.
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