Canada Emergency Commercial Rent Assistance for Small Businesses (CECRA)

The Program

Commercial property owners with small business tenants who have been affected by COVID-19 may elect to lower the rent charged by 75% for a three-month period. This would mean eligible small business tenants would only have to pay 25% of their monthly rent for the months of April, May, and June. The program is designed to assist those small businesses who have suffered significant decreases in revenue, and who may have difficulties paying the pre-COVID-19 rent.

To Qualify as an Eligible Small Business

  1. Business must be paying less than $50,000/month in rent; and
  2. Either have ceased to operate due to COVID-19 or have experienced at least a 70% reduction in gross revenues.

*Non-Profit organizations and Charities may also qualify for this program.

How it Works

Administered by the Canada Mortgage and Housing Corporation, commercial property owners may apply for “loans” to cover 50% of the rent payments due in the months of April (retroactively), May, and June, provided that they agree to reduce the commercial tenant’s rent during this period by 75%.

If the commercial property owner agrees to reduce the eligible small business tenant’s rent by at least 75% the loans will not have to be paid back. The small business tenant would only be obligated to pay 25% of the pre-COVID-19 rent. The agreement would also require a moratorium on eviction for the three-month period.

Example

For example, if the conditions set out above are met, and the tenant is an eligible small business who was ordinarily paying $10,000/month, then the commercial property owner could apply through the Canada Mortgage and Housing Corporation for a loan of $15,000 to cover 50% of the tenant’s rent from April-June. If the commercial property owner agreed to reduce the rent price to $2,500/month for this three-month period, then the $15,000 loan the commercial property owner received would be forgiven and would not have to be paid back. The tenant would be responsible for paying $2,500/month during that period. This can be illustrated as follows:

January 2020 Rent March 2020 Rent March 2020 Rent:
   Owner charges: $10,000    Owner charges: $10,000    Owner charges: $10,000
   Tenant pays: $10,000    Tenant pays: $10,000    Tenant pays: $10,000

► Owner applies for CERCA loan through Canada Mortgage and Housing Corporation.

April 2020 Rent May 2020 Rent June 2020 Rent
   Owner charges: $2,500    Owner charges: $2,500    Owner charges: $2,500
   Tenant pays: $2,500    Tenant pays: $2,500    Tenant pays: $2,500
   Owner receives from gov: $5,000    Owner receives from gov: $5,000    Owner receives from gov: $5,000

► Because the commercial property owner agreed to reduce the rent by 75% the owner would not have to pay back the $15,000 the owner received from the government through this CECRA rent assistance program.

More information to come

The application process for CECRA is expected to open in mid-May. Until then the Finance Minister Bill Morneau is asking commercial landlords to be flexible while details are being finalized.