On April 24, 2020, Prime Minister Justin Trudeau provided some parameters and details of the Canada Emergency Commercial Rent Assistance (CECRA) program. The program was introduced without detail on April 16, 2020. The goal of the CECRA is to provide to tenants running small and medium-sized businesses some rent relief, while at the same time, assisting commercial landlords.

Under the CECRA program, qualifying tenants will have “rent” obligations lowered by 75% for the months of April, May and June but would remain responsible for 25% of the rent for those months. The federal government will take on responsibility for 50% of such rent for such months, with the expectation the landlord would also bear 25% of the responsibility for such rent (through rent forgiveness of such amount).¹ Note however that the backgrounder document issued by the Ontario Government, uses the phrase of “before profit cost” to the landlord and that the landlord would be required to lower the rent to 25% of the rent “that relates to fixed costs” for the three month period.² No definition of those terms have yet been provided. Further details and definitions will be critical.

The program is structured as forgivable loans to landlords. Qualifying commercial landlords will receive forgivable loans to cover 50% of the rent (as that may be later defined given the reference to “before profit cost”) for the months of April, May and June and any such loan will only be forgiven if the landlord agrees: (i) to reduce the eligible tenant’s rent by at least 75% for the qualifying three month period; and (ii) not to evict the tenant while the agreement is in place.³ To qualify, a tenant must be a non-essential business, whose rent obligation is less than $50,000 per month for the relevant premises and such tenant must have temporarily ceased operations or have experienced at least a 70% drop in revenue as a result of COVID-19.⁴ Non-profit and charitable organizations will also be eligible for CECRA support.⁵ 

The forgivable loans will be administered by the Canada Mortgage and House Corporation (CMHC). Information released by the Province of Ontario in a backgrounder document includes that where a property owner does not have a mortgage secured by a commercial rental property, that owner should contact CMHC to discuss options and options may include applying the funds against cost payment obligations or debt facilities. The information released did not specifically state that otherwise funds would be applied to an owner’s mortgage financing but that may be the intent. We will continue to monitor any details that clarify this point.

The government intends to rollout this program by mid-May. Landlords who agree and seek such loans and who have eligible tenancies would need to include retroactive rent adjustments in their agreement with relevant tenants. The program will be available until September 1, 2020, so can be applied retroactively to the rent for April, May and June.

No guidance was provided for what must be included in a rent forgiveness agreement. It  seems likely to intend rent abatement and not rent deferral, but we cannot confirm this point until further details are released.

While the CECRA is clearly intended to provide relief to small commercial tenants affected by COVID-19, the Prime Minister stated that information on commercial rent support for larger businesses will be released in the coming days.

Dentons will continue to monitor the developments resulting from COVID-19 and further details announced on CECRA program. If you have any questions or concerns, please contact Sonja Homenuck, Vince Fuda, or any other member of Dentons’ Commercial Real Estate Law team.

Links to the announcements to date can be found here, including a background piece with further detail.

• News Release
• Federal Press Release
• Ontario Press Release
• Ontario Backgrounder

^{1 Ontario Backgrounder document}

^{2 Ibid}

^{3 Ibid}

^{4 Ibid}

^{5 Ibid}