The Prime Minister and Finance Minister Bill Morneau provided more details today about the Canada Emergency Commercial Rent Assistance (CECRA) agreement they have reached with the provinces and territories.
The program, which will be available in mid-May, will provide commercial tenants with a 75% rent reduction in the months of April, May, and June 2020.
For the tenant to qualify, its rent must be less than $50,000 per month, and they must, per the Prime Minister's press release, "have temporarily ceased operations or have experienced at least a 70 per cent drop in pre-COVID-19 revenues". As with the initial announcement of the CEWS wage subsidy, there is no precise information about how the 70% decline in revenues is to be calculated. However, if the plan is intended to be similar to the enacted CEWS, then perhaps tenants will be able to elect between using either certain months in 2020 or the same months the previous year for comparison purposes.
The 50% loan will be forgiven when the landlord shows it has in fact reduced the tenant's rent by 75%.
The 50% CMHC loan is financed with contributions from the federal government and the applicable provincial/territorial government.
The government is hoping that landlords will see the benefit of receiving at least 75% of their monthly rent (i.e. 50% from the forgivable loan and 25% from the tenant) at a time when they might reasonably not collect any rent from tenants, and agree to these terms. This program clearly requires a degree of cooperation between landlords and tenants, the latter of which stand to benefit from a 75% reduction in rent for April, May, and June 2020.
Note: while this blog and the information above provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. For more information about the CECRA, or if you have any other questions regarding your commercial lease issue, please contact our office for a consultation with one of our lawyers.
The program, which will be available in mid-May, will provide commercial tenants with a 75% rent reduction in the months of April, May, and June 2020.
How It Will Work
Landlords must enter into an agreement with the Canada Mortgage and Housing Corporation (CMHC) for a forgivable loan covering 50% of commercial rents for each eligible tenant. The landlord must agree to a moratorium on evictions and reduce the tenant's rent by 75%.For the tenant to qualify, its rent must be less than $50,000 per month, and they must, per the Prime Minister's press release, "have temporarily ceased operations or have experienced at least a 70 per cent drop in pre-COVID-19 revenues". As with the initial announcement of the CEWS wage subsidy, there is no precise information about how the 70% decline in revenues is to be calculated. However, if the plan is intended to be similar to the enacted CEWS, then perhaps tenants will be able to elect between using either certain months in 2020 or the same months the previous year for comparison purposes.
The 50% loan will be forgiven when the landlord shows it has in fact reduced the tenant's rent by 75%.
The 50% CMHC loan is financed with contributions from the federal government and the applicable provincial/territorial government.
The government is hoping that landlords will see the benefit of receiving at least 75% of their monthly rent (i.e. 50% from the forgivable loan and 25% from the tenant) at a time when they might reasonably not collect any rent from tenants, and agree to these terms. This program clearly requires a degree of cooperation between landlords and tenants, the latter of which stand to benefit from a 75% reduction in rent for April, May, and June 2020.
Note: while this blog and the information above provides general information, it does not constitute legal advice. The best way to get guidance on your specific legal issue is to contact a lawyer. For more information about the CECRA, or if you have any other questions regarding your commercial lease issue, please contact our office for a consultation with one of our lawyers.