Many commercial tenants whose revenues have severely declined or whose businesses have been ordered closed because of the COVID-19 pandemic have become financially unable to pay their commercial rent. These tenants are demanding rent deferral or forgiveness from their landlords. However, landlords rely on part of the rent paid by their tenants to pay the landlord's expenses for the leased commercial real property, such as mortgage payments, realty taxes and utilities. Some landlords may require relief from their expenses to be able to pass on rent relief to their tenants.

On April 16, 2020, the federal government announced that it was working on an aid program for businesses referred to as the Canada Emergency Commercial Rent Assistance (CECRA) program to provide loans to property owners to help lower or forgo rent of small and medium-sized businesses for April (retroactive), May and June 2020. Further details of the program were provided on April 24, 2020. The federal, provincial and territorial governments will be working together to fund the program by way of forgivable loans. The funds will flow through the Canada Mortgage and Housing Corporation (CMHC) to the commercial real property owners (the landlord). While CECRA is designed to assist small and medium-sized tenants, the government did say that information on assistance for larger tenants will come.

The program is expected to launch mid-May and as discussed above, will apply retroactively. Currently, the program is designed to lower the rent of small and mid-sized business for the months of April, May and June.

The program is designed to provide a forgivable loan to those commercial property owners (landlords) that agree to provide a minimum of 75% in rent relief per month to their small- and medium-sized tenants for the months of April, May and June. Additionally, it is not clear if the program is only available to commercial property owners whose property is mortgaged by a lender. In Ontario, the provincial government's April 24, 2020 Backgrounder: Ontario-Canada Emergency Commercial Rent Assistance Program provides that property owners without a mortgaged commercial rental property should contact CMHC to discuss options which may include applying the forgivable loan against the landlord's other forms of debt facilities or towards the landlord's fixed cost payment obligations (such as utilities), instead of against the landlord's mortgage. The program is designed to provide rent relief for those tenants whose:

These small- or medium-sized businesses will also include not-for-profit and charitable organizations.

As mentioned above, CECRA is designed to provide rent relief for small- and medium-sized businesses. However, it is the landlord that has access to the program and who must apply for the program. The landlord must be willing to apply for the program and bear the burden as well.

As mentioned, the program will provide commercial real property owners (landlords) with a loan funded by the federal and provincial (or territorial) government and managed by CMHC. These loans granted to the landlords will be forgiven if the landlord agrees to reduce the rent of eligible small or medium-sized tenants by a minimum of 75% pursuant to a rent deferral agreement and such rent deferral agreement includes a covenant from the landlord to not evict the tenant throughout the term of the rent deferral agreement. The loans granted by the government will fund 50% of the rent leaving the landlord to absorb the cost of the remaining balance of the reduced rent of at least 25% and the tenant to pay the balance of the outstanding monthly rent owing. In the case of a 75% reduction on the monthly rent, the landlord will be left with the burden of absorbing 25% of the monthly rent and the tenant paying the remaining 25% of the monthly outstanding rent. Accordingly, a commercial landlord who grants rent relief to tenants may be bearing or absorbing a disproportionate burden of the cost of the lockdown.

This could leave some eligible tenants in a precarious position if the landlord chooses not to apply for the program. From the details provided to date, this program is voluntary to the landlord and the tenant is not able to apply for the program nor can it force the landlord to apply. However, many landlords may see CECRA as a means of receiving some rent as opposed to no rent. Landlords may also see the benefits of working with their tenants through this financial hardship to ensure it has a leased-up property when the restrictions are lifted and a continued revenue stream (even if it is reduced).

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