Canada Emergency Commercial Rent Assistance (CECRA)

What is the Canada Emergency Commercial Rent Assistance Program (CECRA), and how does it work?

The CECRA program will provide forgivable loans to qualifying commercial property owners to cover 50% of three (3) monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June.

The Program

The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75% under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place. The small business tenant would cover the remainder, up to 25% of the rent.

Who Qualifies as a Small Business Tenant?

Impacted small business tenants are businesses who;

  • Pay no more than $50,000 in monthly 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 has experienced at least a 70% decline in pre-COVID-19 revenues.

Property Owners

CECRA for small businesses is applicable to commercial property owners with:

  • Eligible small business tenants
  • Eligible small business subtenants
  • Residential components and multi-unit residential properties with commercial tenants (i.e. mixed usage)

 

To qualify, property owners must meet the following requirements:

  • You own property that generates rental revenue from commercial real property located in Canada.
  • You are the property owner of the commercial real property where the impacted small business tenants are located.
  • You have a mortgage loan secured by the commercial real property, occupied by one or more small business tenants.
  • You 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%.
  • Your rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020.
  • You have declared rental income on your tax return (personal or corporate) for tax years 2018 and/or 2019.

 

How Does it Work?

While it is expected that CECRA will be operational by mid-May, commercial landlords are expected to either enter into the agreement, reducing rent immediately, or, once the program details have arrived, enter into the agreement and refund the monies to the tenant.

 

What Will CRA be looking for?

In order to support the credit, the CRA will be checking to ensure revenue loss. Small businesses can compare revenues in April, May and June of 2020 to that of the same month of 2019. They can also use an average of their revenues earned in January and February of 2020. If these figures do not justify a revenue loss of at least 75%, the credit will need to be paid back to the CRA.

 

What will CMHC be looking for?

CECRA for small businesses loans will be forgiven if the property owner complies with all applicable program terms and conditions including to not seek to recover rent abatement amounts after the program is over.

 

Administering the Program

CMHC will administer the program on behalf of the Government of Canada, provincial and territorial partners.

 

The program offers assistance for the months of April, May and June, 2020.

  • 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.

 

If rent has been collected at the time of approval, a credit to the tenant for a future month’s rent (i.e. July for April) is acceptable if agreed upon by both the property owner and the tenant. This can be a flexible 3-month period.

 

The deadline to apply is August 31, 2020.

 

Program Summary Details

CMHC will provide forgivable loans to eligible commercial property owners.

  • 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).

 

 

Author: Warren Orlans

Welcome to inTAXicating. inTAXicating has been published since 2008 to provide clarity around Canadian taxation issues, primarily related to the Canada Revenue Agency. As the primary author, Warren Orlans, has over 20-year's experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and 7-years working in the private sector Managing the tax departments for large financial institutions. If you have a collections, compliance or audit issue with the CRA, inTAXicating is the place you need to contact. inTAXicating works in strategic partnership with amazing accountants, tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. If you have a tax question, feel free to ask in the comments, or email me at either info@intaxicating.ca, or intaxicatingtaxservices@gmail.com.

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