The Canada Emergency Commercial Rent Assistance Program (CECRA)
The governments of Canada and Ontario have put in place a new program, the Ontario-Canada Emergency Commercial Rent Assistance Program (CECRA) to assist small businesses with their rent burden. The program is intended to share the cost of rent between government, small business tenants and property owners. Property Owners and Tenants would each pay 25% of the gross rent (as defined by the CECRA programme). The provincial and federal government would cost share the remaining 50% by way of a forgivable loan structure.
To be eligible for the CECRA, the property owner must:
- Own property that generates rental revenue from commercial real property located in Canada.
- Be the property owner of the commercial real property where the impacted small business tenants are located.
- Have entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce impacted small business tenant’s rent by at least 75%.
- Complete the rent reduction agreement with impacted tenants, including a moratorium on eviction for the period of April, May and June 2020.
- Complete a declaration of rental income by way of an attestation by the Property Owner – the application process provides a template attestation form.
The small businesses that will be eligible for the CECRA are those who:
- Pay monthly rent not exceeding $50,000 in gross rent per location (as defined by a valid and enforceable lease agreement);
- Generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level); and
- Have temporarily ceased operations (i.e., generating no revenues), or who are experiencing a 70 per cent drop in pre-COVID-19 revenues (determined by comparing revenues in April, May or June of 2020 to the same month of 2019 or alternatively, if a new business, compared to average revenues earned in January and February 2020).
Certain small businesses are excluded from the CECRA program, including entities owned by individuals holding political office, entities that promote violence, incite hatred or discriminate on the basis of race, national or ethnic origin, color, religion, sex, age or mental or physical disability, and entities in the Lenders special accounts or Restructuring Group prior to March 1, 2020.
With the end of the month looming, this program is particularly appealing to small businesses who have been crippled by the covid-19-induced financial crisis. However, due to the fact that the property owner must be the one applying to the program, several small business owners have raised the alarm to the province, stating that they may not in fact be able to benefit from it. The Ford government has strongly urged landlords to partake in the CECRA, indicating that further actions may be taken if tenants were not protected, but, as of now, participation in the CECRA is on a voluntary basis.
This situation poses a number of questions:
- Will the Courts hear eviction hearings?
- Due to the current covid-19 situation, the Superior Court of Justice has put in place restrictions on which court proceedings can move forward, and, since evictions have not been referred to specifically in any practice directions so far, they will only be heard if they are deemed “urgent”, which is defined as “urgent and time-sensitive motions and applications in civil and commercial list matters, where immediate and significant financial repercussions may result if there is no judicial hearing”. The courts have heard eviction hearings in the covid-19 situation, but these have been mostly limited to those relating to residential tenancies. Should the practice direction continue to be in place and with more landlords being faced with difficult financial situations, the courts may be more inclined to determine that commercial evictions involve immediate and significant financial repercussions.
- Will the Courts enforce eviction orders?
- Ontario’s Chief Justice issued, on March 19, 2020, an Order suspending residential evictions due to the covid-19 situation, and it is currently still in effect. However, this Order does not cover commercial tenancies, and, in May 2020, the Ford government clearly indicated that it will not be pausing commercial evictions. As such, there is nothing preventing the Court from rendering an Order allowing the landlord re-entry or forfeiture. However, in British Colombia, the Finance Minister announced, on June 1, 2020, that it would enact an emergency order that would restrict property owners from evicted businesses if they chose not to apply to CECRA.
- Will a tenant’s request for application under the CECRA be considered a mitigating factor in an eviction hearing?
- The Commercial Tenancies Act provides for relief provisions where the courts can grant relief against re-entry or forfeiture based on the conduct of the parties, all the other circumstances and based on what it deems to be fit. Based on the subsidies that have been readily available by the provincial and federal governments through the program, it would seem just for a Court to consider that a landlord’s failure to apply to the CECRA before taking steps to evict the commercial tenant in the covid-19 situation would be grounds for granting the tenant relief from re-entry or forfeiture. On the other hand, property owners are being asked to forego 25% of their revenue to participate in the program. This and the onerous application, implementation and ongoing monitoring/implementation obligations on a property owner, could be taken into account by the court in assessing the “conduct of the parties” if a commercial property owner chose not to apply to the CECRA.