After the first Government support program (CEBA) launched [Blog Link] , it became evident that rent payments were one of the biggest looming risks to small businesses in Canada. The CEBA could be used for rent, but some commercial rent especially near downtown cores are far too expensive to be fully serviced by the CEBA loan. Businesses began to worry and called on the Government to support their struggle and to help them make next month’s rent.
As a small business, rent can sometimes be your largest expense easily reaching several tens of thousands of dollars per month. With that in mind, the Government will be launching the CECRA program May 2020 in order to protect small businesses from the significant impact that rent payments are having on their balance sheet.
The nuance in this program is that although tenants would get a break from their rent, it is actually the landlords that must apply for this program and some may choose not to.
A quick overview of the details around CECRA:
- Commercial landlords are able to receive a government loan covering half of the commercial rent payments until June, if they are willing to reduce the tenant’s commercial rent by 75% under a rent forgiveness agreement that includes a term to not evict the tenant while the agreement is in place.
- Business owner tenants would still have to pay the remaining 25% of their commercial rent.
- Business owner tenants are eligible if they pay less than $50,000 per month in rent and have experienced a 70%+ drop in revenue due to COVID.
How does it work?
The CECRA program is different from the CEBA program in that it focused on the commercial landlords rather than the affected small business owner. It’s a program that essentially subsidizes the commercial rent of eligible tenants by entering into an agreement with the landlords.
Commercial landlords can apply to receive a government loan that covers half of the rent payments from their tenants until June 2020 and in return, the commercial landlords must reduce their rent by 75% for eligible tenants. Landlords also commit to not evicting their tenants for the duration of the agreement.
However, the program is optional. Commercial landlords are not legally required to sign up for this program and may choose to come to a different individual agreement with each of their tenants.
Who can get it?
To be eligible to be included in a possible CECRA rent reduction from your landlord, Canadian business owner tenants must fit the following criteria:
- Business pays less than $50,000 per month in rent.
- Business has experienced a 70% or more drop in revenue due to COVID.
Frequently Asked Questions
What if my landlord does not want to use CECRA to lower my rent?
Unfortunately the CECRA program is voluntary, meaning that your landlord is not legally obligated to enter into the program.
The program itself is beneficial to both parties in that it ensures the landlord makes 75% of their original revenue and it protects the tenant in lowering the risk of a missed payment. However, landlords can still legally enforce the full rent amount or come up with their own agreement with their tenants.
If I am a sole proprietor, am I still eligible?
Sole proprietors are still eligible as long as they meet all of the aforementioned criteria as a commercial tenant.
When is this program scheduled to go live?
Government estimates the program will officially launch some time during mid-May with further details