This week, Prime Minister Justin Trudeau announced the Canada Emergency Commercial Rent Assistance (“CECRA”) for small businesses, which will provide relief for small businesses experiencing financial hardship due to COVID-19.
It will offer forgivable loans to eligible commercial property owners so that they can reduce the rent owed by their commercial tenants by at least 75% for the months of April, May and June, 2020.
Who Is Eligible?
To qualify for CECRA for small businesses, the property owner must meet the following requirements:
- The applicant owns property that generates rental revenue from commercial real property located in Canada.
- The commercial real property is occupied by an impacted small business tenant.
- The owner has a mortgage loan secured by the commercial real property, occupied by one or more small business tenants (an alternative mechanism will soon be announced for those without a mortgage).
- The owner has entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce impacted the small business tenant’s rent by at least 75%.
- The rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020.
- The owner has declared rental income on its tax return (personal or corporate) for tax years 2018 and/or 2019.
What Constitutes an “Impacted Small Business”?
An impacted small business tenant is a business, including a non-profit and charitable organization who:
- Pays no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement),
- Generates no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level), and
- Has temporarily ceased operations (i.e. generating no revenues), or has experienced at least a 70% decline in pre-COVID-19 revenues.
How Does CECRA Work?
- The loans will cover 50% of the gross rent owed by impacted small business tenants during the 3-month period of April, May and June 2020.
- The property owner will be responsible for no less than half of the remaining 50% of the gross rent payments (paying no less than 25% of the total).
- The small business tenant will be responsible for no more than half of the remaining 50% of the gross rent payments (paying no more than 25% of the total).
- It can be applied retroactively.
- Property owners may still apply for assistance once the 3-month period has ended if they can prove eligibility during those months.
- Property owners must refund amounts paid by the small business tenant for the period.
The deadline to apply is August 31, 2020.
Legal Recourses: Evictions During COVID-19
On March 25, 2020, the British Columbia government announced a moratorium on residential evictions. As a result, the Residential Tenancy Branch will not hear or issue eviction orders until further notice.
With regard to commercial tenancies, evictions of commercial tenants in BC are subject to the Commercial Tenancy Act. The Act does not provide for a right of repossession absent a court order. As a result, a commercial landlord’s right of repossession is regulated by common law principles or a provision in the lease itself. A commercial landlord may seek court sanction through an application to the British Columbia Supreme Court; however, due to the COVID-19 pandemic, the Court has suspended regular operations until further notice, with the exception of urgent matters. This week, provincial courts in BC announced that they are moving to a recovery plan, with details to follow.
We are committed to the health and safety of our community and helping ‘flatten the COVID-19 curve’. Our office remains open, but for the health and safety of all members of our community we will be limiting in-person client engagements in our office until further notice.
Your matters are extremely important to us and we want to ensure you that business will not be disrupted.
If you have any questions we encourage you to contact us at firstname.lastname@example.org. Let’s continue to take care of each other during this difficult time.
At Cherkowski Marsden LLP, we draw upon our extensive corporate law and real estate law experience to assist our business clients with all aspects of negotiating and finalizing their lease agreements. We take care of the fine print, logistics, and negotiations to secure an optimal space for your venture so that you can run your business stress-free. We can assist on a one-time transactional basis, or we can be retained on an ongoing basis to help with multiple lease agreements as your business grows, re-negotiating terms if your business needs change, and assisting with dispute resolution if any problems arise with your landlord.
The business lawyers at Cherkowski Marsden LLP work with business professionals at all levels and across a wide range of industries. We look forward to utilizing our considerable experience in commercial leasing to protect the rights and interests of your business. We can be reached online or by phone at 250-308-0338 (Vernon office) or 250-803-9171 (Salmon Arm office).