What's the Deal With CECRA? My Thoughts On the Government's Newest Initiative to Help Businesses' Pay Rent
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While conducting a consultation with one of my commercial tenant clients the other day, a major initiative from both the provincial and federal governments came up: The impact of the Canada Emergency Commercial Rent Assistance (CECRA) program. To put it plainly, CECRA (officially introduced on April 16, 2020) was created to help the small-to-medium size business out. Primarily, the Ontario and Canadian governments have partnered to do one particularly important thing: Allow these businesses to pay their full (or close to full) rent.
As you can imagine, COVID has just about affected everything. This includes, small-to-medium size businesses, who although might have been doing very well pre-COVID, are now often struggling to make rent. One of my first articles on this blog, "Can't Afford To Pay Rent During the COVID Crisis? - Not All Is Lost For Tenant Businesses", talked about how small-to-medium size business tenants can, using legal strategy, avoid a hostile or uncompromising landlord from enforcing rent payments. However, in light of an obvious need to help small and medium size businesses out, our provincial and federal governments have now introduced CECRA.
What is CECRA you might ask? Although officially introduced in mid-April, the program has not been fully formulated for the most part until later that same month. Below is a short breakdown describing what Ontario's newest relief to help small-to-medium size businesses is:
- CECRA has the ability to allow small-to-medium size businesses to have up to 75% of their rent covered for the months of April, May, and June of 2020;
- Landlords who enter into the CECRA program with commercial tenants will be provided with forgivable loans to help cover 50% of the commercial tenant rent;
- As long as a commercial Landlord and Tenant enter into a Rent Reduction Agreement, and the commercial Tenant qualifies under CECRA guidelines, the program will apply.
- Keeping their small-to-medium size tenant: Plainly put, why wouldn't a Landlord want to keep a Tenant who for the most part, has probably paid their rent on time pre-COVID? Commercial tenants can provide a long-term revenue stream for Landlords. Furthermore, the business they attract has the ability to increase Landlord property value.
- It looks good on the Landlords: Let's be honest, lately, the news have showcased Landlords in not the best of light. The stereotype of the hostile/ruthless landlord has been profiled in several instances during COVID. Society is currently in sensitive times, and for those Landlords not giving their Tenants a break - it could be a major PR hurdle.
As for which commercial tenant businesses are eligible for CECRA, the following briefly describes who is a "small business" for CECRA purposes:
- Pays no more than $50,000 in rent per month;
- Generates no more than $20 million in yearly revenue;
- Has Experienced at least a 70% decline in revenues during the months of April to June (2020).
It should be noted that for tenant businesses who are unsure if they have suffered a 70% decline, their 2020 statements from April to June can be compared to those from the same months in 2019. Bottom line - CECRA works both ways. Although intended to assist small-to-medium commercial businesses, it also benefits commercial landlords who want to keep tenants that have the ability to make them money in the long-run. Despite this, the program remains voluntary. Will this have an adverse effect on both parties during this crisis? Time will only tell, but feel free to share your thoughts on CECRA with me!
Aaron Miller is a Toronto based, Ontario lawyer who is the proud owner of Aaron Miller, Barrister & Solicitor. Aaron also acts as Legal Counsel for Executive Furniture Rentals in Toronto. If you are a small-to-medium size business that is experiencing a commercial landlord-tenant issue, feel free to contact Aaron at 416-659-6665 or at email@example.com. He would love to hear from you!