With the arrival of May, we are another month into the COVID-19 crisis. It also means that another month of rent is now due, or past due, for many small businesses that have seen a significant drop in revenue, or perhaps have been closed for much of the past two months.
In late April, the federal government announced an agreement in principle with all provinces and territories to implement the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. This program would lower rent by 75 per cent for small businesses that have been affected by COVID-19.
The Sault Ste. Marie Chamber of Commerce has welcomed news of the program and is strongly encouraging local businesses and commercial landlords to work together to meet eligibility requirements.
“We are pleased to see the Federal and Provincial governments working together to bringing forward and undertake a critical initiative like rent relief. Rent obligations have been a major point of anxiety for businesses and this program aims to alleviate this,” says Rory Ring, CEO of the Sault Ste. Marie Chamber of Commerce.
Ring notes that “there will be financial requirements for both the landlord and the business tenant, but if they can agree to make the required terms work, there is a much better chance that the business will be able to recover post COVID-19. That would represent a net positive for the landlord, because in most cases, the financial cost of forgiving a portion of a few month’s rent will likely be much less than generating zero rental income while searching for a new commercial tenant.
The CECRA is being developed to share the cost between small business tenants and landlords. Small business tenants and landlords would each be asked to pay 25 per cent of the before-profit costs and the provincial and federal government would cost share the remaining 50 per cent in the form of a forgivable loan.
To receive the loan, property owners will be required to reduce the rental costs of small business tenants for April to June 2020 by at least 75 per cent. The loan would also be contingent on the signing of a rent forgiveness agreement between impacted tenants and landlords. This would also include a moratorium on evictions for three months.
The Ontario CECRA would be administered by the Canada Mortgage and Housing Corporation (CMHC) and would be available until September 30, 2020. Support would be retroactive to April 1, covering April, May and June 2020.