Property owners can now apply for the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses directly through the Canada Mortgage and Housing Corporation website. The federal program opened for online applications on May 25, 2020.
The CECRA provides relief for small businesses experiencing financial hardship due to COVID-19. It offers unsecured, forgivable loans to eligible commercial property owners (whether they have a mortgage on their property or not) to reduce the rent owed by their small business tenants. The loans will cover 50 per cent of three, monthly rent payments payable by eligible small business tenants experiencing financial hardship during April, May and June 2020.
The loans will be forgiven if the property owner agrees to reduce the small business tenants’ rent by at least 75 per cent. The small business tenant would cover the remainder, up to 25 per cent of the rent.
To qualify for CECRA:
Small business tenants must attest to their eligibility with the program requirements:
* Gross rent in a given location is less than $50,000 per month; annual revenues are less than $20 million (at the ultimate parent level); and the business has incurred at least a 70-per-cent drop in pre-COVID-19 revenues.
Property owners must attest the information provided in their application is correct and they meet the eligibility requirements of the program:
* A legally binding rent reduction agreement for the period of April, May and June 2020 has been entered into, reducing an impacted small business tenant’s rent by at least 75 per cent;
* The rent reduction agreement with each impacted tenant includes a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds; and a declaration of rental revenue.
Property owners can register at the application portal, which opened on May 25, 2020 and the deadline to apply is August 31, 2020. Once registered, applications can be made for one or multiple properties.
There are various agreements included in the portal that need to be signed and submitted with an application. The property owner also needs to obtain certain information from their tenant(s) they may not currently have and that is not in the tenant’s or sub-tenant’s attestation.
For owners of multiple properties with a large number of tenants, individuals within an organization should be identified to budget their time to obtain all required information, ensure its completeness and accurately enter the data in the application portal.
This interest-free loan will be forgiven on December 31, 2020. To ensure loan forgiveness, the property owner must follow the terms and conditions of the loan, including complying with the rent reduction agreement and ensuring the attestation and application (including supporting documentation) is accurate and truthful.
The list below includes the required agreements and information:
Agreements and attestations (can be found in application portal once registered):
* Tenant’s or Sub-Tenant’s Attestation to be signed by tenant;
* Property Owner’s Attestation to be signed by property owner;
* Rent Reduction Agreement to be completed and signed by property owner and tenant;
* application terms and conditions (to be reviewed but not submitted).
Information to be complete in application:
* various property owner information, including name of registered owner of property, tax registration number and whether there are co-owners on title;
* owner / co-owner information, including legal name and contact details;
* property owner bank account information;
* property details including address, type of property and total number of commercial units.
* tenant information including: registered business name; business number; number of employees; North American Industry Classification System (NAICS) Code (dropdown menu provided to choose options); area leased (square feet); gross consolidated revenues from last fiscal year-end; gross monthly rent; are the property owner and any impacted tenant not at arm’s length (yes or no); total tenant proceeds from insurance or other non-repayable rental support programs (if applicable); total rent for April 1 to June 30, 2020; and average rent per square foot.
Additional information to be submitted along with the application form:
* copy of property tax statement;
* rent roll for the property, current as of June 1, 2020 (if June rent roll is not yet available, then provide current rent roll);
* copy of most recent bank account statement related to the subject property.
Acknowledgement and Signature:
* terms and conditions of the Property Owner Forgivable Loan Agreement are listed and are required to be acknowledged with an electronic approval;
* particular attention should be made to reviewing the terms of the loan including the purpose of the loan: The property owner agrees that the loan will solely be used by the property owner as follows: (a) to reimburse impacted tenants in respect of any rent paid by them during the eligible period above twenty-five per cent (25 per cent) of the adjusted rent due and payable during the eligible period, as set out in the rent reduction agreement(s), unless the impacted tenant elects to apply the previously paid rent against rent next coming due; and (b) toward any costs and expenses relating directly to the property, including any debt service (principal and interest) payments in connection with any financing held by the property owner, operation, maintenance and repair obligations (such as costs of common area maintenance, property taxes, insurance and utilities) and the property owner will maintain proper and detailed records and statements of account, including receipts, invoices and other documents related to such uses.
Tenants and landlords alike can benefit from the CECRA program, but much attention must be taken to ensure all required information is gathered and included in the application. The time involved can lead to more positive outcomes.
MNP is here to help
There continue to be many uncertainties as the COVID-19 situation develops, from the government to consumer responses. We are here to help you navigate through them. If you have any questions or concerns about what to do next, please reach out to your local Real Estate and Construction Advisor or visit our COVID-19 Business Advice Centre.