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COVID-19: Government Announces Canada Emergency Rent Subsidy (CERS): Replacement to Canada Emergency Commercial Rent Assistance Program (CECRA)
Practical Law Canada Legal Update w-027-9058 (Approx. 4 pages)
COVID-19: Government Announces Canada Emergency Rent Subsidy (CERS): Replacement to Canada Emergency Commercial Rent Assistance Program (CECRA)
by Practical Law Canada Commercial Real Estate
| Published on 14 Oct 2020 • Canada (Common Law) |
The federal government has announced some details (but not complete details) on the Canada Emergency Rent Subsidy (CERS) program, the replacement program to the Canada Emergency Commercial Rent Assistance (CECRA) program which was introduced to provide commercial rent relief for small- and medium-sized businesses in Canada impacted by the 2019 novel coronavirus (COVID-19) pandemic.
Many commercial tenants whose revenues have severely declined or whose businesses had been ordered (or most recently have been re-ordered) closed because of the COVID-19 pandemic have become financially unable to pay their commercial rent. These tenants are requesting rent deferral or forgiveness from their landlords. However, landlords rely in part on 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. At the end of June 2020, the federal government announced that CECRA would be extended for small businesses through the end of July 2020 but only for those small businesses that were eligible for April, May and June. At the end of July, the federal government extended the CECRA program through to the end of August 2020 but only for those applicants who apply by the deadline for the extensions and are approved for the program for April, May and June (see Practice Note, COVID-19: Impact on Commercial Real Estate: When Will the Program Be Available?). On September 8, 2020, the federal government announced that it was extending CECRA for the last time to also include rent for the month of September 2020. The September extension is voluntary (as were the July and August extensions).
CECRA ended on October 1, 2020. That is, September 2020 was the last month of rent covered by the program.
Canada Emergency Rent Subsidy (CERS)
On October 9, 2020, the federal government released information of its new rent-subsidy program, the Canada Emergency Rent Subsidy (CERS) which will replace CECRA, because many small business tenants have not yet recovered from the effects of the pandemic and to address the most recent mandated closures in Quebec and Ontario of certain small businesses that include indoor dining areas, gyms and bars.
Details of CERS and how it differs from CECRA include:
- The tenant will apply directly for the subsidy as opposed to having to rely on the landlord's election to apply for the program.
- This program will be provided on a sliding scale depending on how much the tenant's revenue dropped. Some relief will now be available to those tenants who have a revenue loss of less than 70%.
- The tenant will be granted relief or subsidy of up to a maximum of 65% of their rent owing or their mortgage interest payments until December 19, 2020 if they have a revenue loss of 70% or more. For those tenants that have experienced a revenue loss of less than 70%, the subsidy will still be available, however, the subsidy will be less (on a sliding scale). While the program is set to be in place until June 2021 the program may change, including the subsidy amounts, after December 19, 2020.
- In addition to the rent subsidy, for those businesses that have been mandated to close by a government order, they may be eligible for additional rent relief of 25% (this could result in a rent subsidy of up to 90%).
- Small businesses, including charities and non-profits, are able to make claims retroactively for the period that began September 27, 2020 according to the Government of Canada news release on October 9, 2020 from the Department of Finance.
It is not clear yet if the eligibility requirements for CERS will be the same as those for CECRA, including (but not limited to):
- Rent be no more than $50,000 a month (gross rent and per location); and
- Gross annual revenue, calculated on a consolidated basis (the parent company level) is no more than $20 million.
Further legislation to implement CERS is still to come.