In response to the Covid-19 epidemic, the Canadian government has offered unsecured and forgivable loans to eligible commercial property owners to reduce the rent for small business and to meet the operating expenses for commercial properties. Called the Canada Emergency Commercial Rent Assistance (CECRA) program, property owners will be eligible for assistance if they offer a minimum 75% rent reduction for the months of April, May and June 2020.
If accepted for the program, the CECRA will cover 50% of the rent for the months of April, May and June. Another 25% will be covered by the tenant and 25% of the rent will have to be forgiven by the landlord.
The application process begins on May 25, 2020. Commercial tenants are not able to apply for the program without their landlord. A landlord can apply on behalf of all their commercial tenants in one application process.
For the CECRA program to be successful, it relies upon buy-in from commercial landlords since it is a voluntary program. The Canadian government is hoping that commercial landlords will want to participate in the program since the ability for commercial landlords to meet the expenses of the property long-term relies upon the success of their tenants.
In order to qualify, the commercial property owner must own commercial property occupied by one or more small business tenants and enter into a legally binding rental reduction agreement that includes a moratorium on eviction and a declaration of rental revenue. A small business tenant is a business that pays less than $50,000 in monthly rent, generates less than $20 million in gross annual revenue and has experienced at least 70% decline in pre-Covid-19 revenue.
In order to apply both the landlord and small business tenants must complete attestations confirming their eligibility for the program. Furthermore the landlord must enter into a rent reduction agreement with each small business tenant and a forgivable loan agreement with the Canadian government. These forms can be found online at https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business.