On Friday, another rent relief package was announced. This package funds tenants rents through landlords.
Under the Canada Emergency Commercial Rent Assistance (CE-CRA) program, federal and provincial governments will cover half of a small business tenants’ rent for April, May and June, while asking landlords to cover one-quarter of the cost. Tenants pay one-quarter of the rent.
Full details are not available at this point, however what we do know is:
- The program is expected to be launched mid-May and apply retroactively to April 1
- The onus is on the landlords to apply for the relief
- The landlord must absorb a quarter of the tenants rent.
- The funds will flow through Canada Mortgage and Housing Corporation to landlords who agree to offset the rent
- Eligible tenants are those whose revenue has dropped at least 70% since the coronavirus pandemic began. The comparative point is not exactly defined.
- The funding is a loan to the landlords which loan will be forgiven if:
- the landlord agrees to reduce tenants rent by 75% and
- the tenants pay 25% of the rent and
- Landlord agrees not to evict the tenant while the agreement is in place. The timeline for the agreement to be in place is not defined.
We are left with the following unknowns:
- What happens to tenants who cannot pay rent next week?
- What happens to tenants whose landlords are offshore and are unaware or unable to apply?
- What happens to tenants whose landlords are unwilling to apply?
- This program is still dependent on what the landlord does; the tenants have no say in the application process.
- Some tenants have already closed for good - for them this relief is too little, too late
- “Rent” is not defined, it is not clear whether ”rent” includes base rent, additional “rent” or both
- If a landlord wants to evict tenants, it will not participate in the program
- Three months rent relief is too short; recovery from this closure will take a period of years
- This program may conflict with existing rent deferral programs offered by some landlords
- Landlords may be able to charge back the quarter they subsidized through additional rent.
- How does this program help tenants who are in agony with sales dropping 60%, or 50% or 40% as they are not eligible?
- What happens if a tenant has a term renewal option shortly after the support period ends; will a landlord agree to extend relief without forcing option exercise?
- Will landlords fund some tenants in a plaza, and not others?
Concerning the pandemic in general, there are many questions and few answers. Our advice is to take matters day-by-day and build in and keep options to manage your affairs open. The lease that was perfect a few months ago now may not be appropriate, but you need to remember to look for opportunities rather than focus on problems.
In the case of this rent relief package, our advice is to be thankful that some program is being offered. Given the complexity of the matter – small and medium sized businesses contribute ½ of Canada's gross domestic product - there is no way to provide the perfect program for all tenants. Encourage your landlords to help you out through this package.