CECRA programCanada Mortgage and Housing Corporation (CMHC) administers CECRA on behalf of the federal government. CMHC has released additional details about this program.
The deadline to apply is August 31, 2020. The program can be applied retroactively. Property owners may apply after the three-month period (April, May and June 2020) has ended if they can prove eligibility during those months.
If rent for April, May and/or June 2020 has already been collected by the property owner/landlord at the time of approval of the forgivable loan under CECRA, the property owner/landlord must refund to the small business tenant rent amounts in excess of the small business tenant’s reduced portion for such period. If the property owner/landlord and the tenant agree, a credit to the tenant for a future month’s rent (i.e., credit applied to July rent for April) is acceptable. CMHC indicates that the credit arrangement can be a flexible three-month period but no further parameters are provided.
The forgivable loans will cover 50% of the gross rent owed by small business tenants during April, May and June 2020 – loan funds will be transferred to the property owner’s financial institution. The property owner will be responsible for no less than half the remaining 50% of the gross rent payments (forgiving no less than 25% of the total gross rent). The small business tenant will be responsible for no more than half of the remaining 50% of gross rent payments (paying no more than 25% of the total gross rent).
Loans provided under the program will be forgiven on December 31, 2020, if the property owner complies with all program terms and conditions, including complying with the rent reduction agreement and ensuring its attestation and application are accurate and truthful. The rent reduction agreement will provide that the property owner/landlord shall not recover forgiven rent amounts when the program is over. If the property owner defaults under the loan or files for bankruptcy, restructures, reorganizes or is dissolved, the property owner will be required to pay back the loan proceeds received under the program.
Property owner requirements
To qualify for CECRA for small businesses, the property owner must:
- own or be the landlord of the commercial real property that: (a) generates rental revenue from commercial real property located in Canada, and (b) is occupied by one or more impacted small business tenants;
- enter (or have already entered) into a rent reduction agreement for April, May and June 2020, that will reduce the impacted business tenant’s gross rent by at least 75%, and includes: (a) a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds (i.e., April, May and June 2020); and (b) a declaration of rental revenue included in the attestation;
- have declared rental income on its tax return (personal or corporate) for tax years 2018 and/or 2019 (note, however, that notwithstanding this requirement, if the property is newly constructed or recently purchased, the property owner may still be eligible for CECRA if other program requirements are met, including having entered into a lease with the eligible tenant on or before April 1, 2020); and
- have a valid and enforceable lease / sublease agreement in place with the impacted small business tenant.
Although the applicant for CECRA is the property owner, the program applies to sublease arrangements – in such scenario, the program requirements will apply at each lease/sublease level.
CECRA for small businesses applies to commercial properties with small business tenants, including those properties with a residential component and multi-unit residential mixed-use properties, whether such commercial properties are mortgaged or subject to other forms of debt or not. CECRA is available to property owners who do not hold a mortgage. The program for small businesses does not apply to any federal, provincial, or municipal-owned properties, with some exceptions.
Small business tenant / subtenant requirements
Impacted small business tenants are businesses (including non-profit and charitable organizations) that opened before March 1, 2020, that:
- 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 experienced at least a 70% decline in pre-COVID-19 revenues, determined by comparing revenues for April, May and June 2020 to either: (a) revenues for the same period in 2019; or (b) an average of revenues earned in January and February 2020.
CECRA for small business tenants extends to subtenants and sub-tenancy arrangements that are governed by a valid and enforceable sublease agreement, provided such sub-tenancy arrangements meet the program criteria.
CHMC has provided guidance on the website regarding what is included in and excluded from gross rent.
The online application portal will open at 8:00 a.m. EST on May 25, 2020. The application process will include fillable fields and uploading documents. Templates of key documents are posted on the CMHC website.
Once the online application portal opens, eligible property owners are being asked to register online on the following days to help CMHC manage the anticipated volume of applicants. Once the property owner has registered, it will be able to enter data and upload documents online through the portal (available 24/7).
|Day||Who should register?|
|1||Property owners who are located in Atlantic Canada, BC, Alberta and Quebec, with up to 10 tenants who are eligible for the program|
|2||Property owners who are located in Manitoba, Saskatchewan, Ontario and the territories, with up to 10 tenants who are eligible for the program|
|3||All other property owners in Manitoba, Saskatchewan, Ontario and the territories|
|4||All other property owners in Atlantic Canada, BC, Alberta and Quebec|
CMHC has engaged MCAP and First Canadian Title (FCT) to deliver CECRA, and MCAP or FCT may contact an applicant for validation and funding purposes.
As part of the application, the property owner must provide certain agreements, attestation forms and general information, including but not limited to the following:
- Tenant or subtenant attestation – NOTE: If a tenant provides any false or misleading information in its attestation, the tenant will be responsible for all rent that was forgiven;
- Property owner/landlord's attestation;
- Rent reduction agreement – NOTE: This agreement is conditional upon final approval of the application for CECRA for small businesses;
- Forgivable loan agreement;
- Property information, including, property address, property type, property tax statement, latest rent roll and number of commercial units;
- Property owner information, including, banking information (including a bank statement), property owner contact information, co-ownership information and contact details for co-owners;
- Tenant information, including, tenant contact information, registered business name, lease area, monthly gross rent for the period of April, May and June 2020.
Available alternate programs
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.
Dealing with distress: business restructuring and rescue
Businesses in every sector and geography are having to transition to new ways of operating within a rapidly changing and increasingly uncertain legal and regulatory landscape.