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CECRA program: Closed to new applicants but extensions still available for existing applicants

Canada Publication October 2, 2020

Further to our May 21 legal update, the terms of the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses program continued to evolve over the summer and the program administrator, Canada Mortgage and Housing Corporation (CMHC), has now confirmed that there will be no further extensions of the CECRA program.

Extension and deadlines

The CECRA program was established to help ensure that small business tenants and sub-tenants were able to pay rent for April, May and June 2020. The CECRA program was extended to also include July, August and September 2020. 

Participation in the extension is voluntary and existing approved applicants to the CECRA program have until October 30, 2020, to apply for the final September 2020 extension.

New applicants had the option of applying for the three-month initial period, plus the July extension (four months), the August extension (five months), or the September extension (six months); however, the deadline to submit a new application has now passed ‒ it was September 30, 2020.

Review of program eligibility

Eligible small business tenants and sub-tenants that qualified for the CECRA program based on existing program measures will be able to apply for the additional month of September (reminder – the deadline to opt in is October 30, 2020) if they had a 70% revenue decline for April, May and June. These approved tenants and sub-tenants will not need to reassess whether they continue to have a 70% revenue decline in July, August or September in order to be eligible.

Eligible small business tenants and sub-tenants are businesses that, among other things: (a) are paying less than $50,000 per month in gross rent in a given location, with annual revenues of less than $20 million (at the ultimate parent level); and (b) have experienced at least a 70% drop in pre-COVID-19 revenues on average for April, May and June.

The forgivable loans provided by the CECRA program cover 50% of monthly rent payments that are payable by eligible small business tenants and sub-tenants during April, May, June, July, August and September, as applied for.

Forgivable loan

Forgivable loan proceeds will be directed into the property owner’s business account. The forgivable loan amount is always advanced directly to the property owner (i.e., the property owner grants a rent reduction agreement to the tenant, and the tenant, in turn, grants a rent reduction agreement to the sub-tenant). 

The CECRA program imposes certain general requirements on using the forgivable loan funds. The terms of each underlying CECRA agreement should be carefully reviewed to determine these requirements. 

The interest-free loan will be forgiven on December 31, 2020, and will not be repayable on December 31, 2020, provided that the property owner has complied with its obligations, which include (but are not limited to) the following: (a) not recovering forgiven rent amounts when the program is over; (b) complying with the rent reduction agreement and forgivable loan agreement terms, conditions and obligations; and (c) ensuring the attestation and application (including supporting documentation) are and remain accurate and truthful.  CMHC will not provide a formal notification of forgiveness. 

In the event of default: (a) the property owner will be obligated to repay the loan in full; and (b) CMHC has full recourse to recover the CECRA funding from the property owner.

Bill 23 update and additional relief programs

The ability for commercial real estate landlords and tenants to deal with tenancy issues in Alberta was put on hold in many respects with the passing of Bill 23: Commercial Tenancies Protection Act and its regulation (CTPA). Our legal update on the CTPA can be found here. The CTPA protects eligible commercial tenants experiencing financial challenges as a result of the COVID-19 pandemic, and addresses gaps in the CECRA program by protecting a wider range of tenants than are eligible for the CECRA program and tenants whose landlords have decided not to apply. The CTPA protection applied from March 17, 2020, to August 31, 2020, or as may be extended by the regulation (emergency end date). The emergency end date has not been extended by regulation and it does not appear that the government intends to extend this date.

There are additional types of support available for businesses, including access to credit programs and deferred payment programs. For information about other government relief programs, refer to our guide.

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