Update to our existing article on the CECRA and OCECRA posted on April 29
Gowling WLG has been monitoring the development of COVID-19 closely and is continuously advising clients as more information becomes available. In the interest of helping commercial landlords and property managers manage the challenges created by the outbreak of COVID-19, Gowling WLG has prepared the following bulletin.
Updates will be available as new information is released.
You will recall that on April 16th, the Government of Canada announced its intent to introduce forgivable loans to commercial property owners to reduce or forgive rent for April, May and June 2020.
Canada Emergency Commercial Rent Assistance (CECRA) is to be managed by the Provinces and administered by CMHC. When the Province of Ontario originally released its Backgrounder on the Ontario-Canada Emergency Commercial Rent Assistance Program (OCECRA), a number of red flags were raised, including statements that the OCECRA would cover 50% of the landlord's before profit costs of the April, May and June rent, and that by applying for OCECRA, the landlord agrees to forego all profit for this 3 month period . Further, it appeared that to qualify the tenant had to be a non-essential workplace .
Confusion was augmented further when on April 29, CMHC, the administrator of the CECRA program provided additional clarification on the mechanics of the program which did not refer to the landlord being required to forgo all profit or limiting eligible tenants to non-essential workplaces. Read Gowling WLG's article summarizing CMHC's April 29 announcement here.
Happily, the Province of Ontario revised its Backgrounder on May 8 and has now removed any mention of these conflicting terms. As a result, the Province of Ontario is NOT requiring that the landlord forgo all profit for April/May/June 2020 or that the tenant be a non-essential workplace. This is good news indeed.
Many landlords and tenants are reaching out to us to ask what this all means and what do they need to be doing today to address these announcements. While many questions have been answered, further detail is required – and promised to be forthcoming. Until then, commercial landlords and tenants are being placed in a difficult situation – on the one hand, tenants are extremely anxious for assurances from their landlords as to the scope of rent relief the landlord is prepared to give, and on the other, it is very difficult for landlords make this commitment without a complete and comprehensive understanding of the financial implications. I suggest that, for now, landlords not agree to rent relief that they would not be prepared to grant without financial assistance from the government. The programs are intended to be retroactive. Landlords can always decide at a later date to be more generous once the terms and mechanics of these programs are more completely disclosed. In their rent relief discussions, tenants may want to ask their landlords to commit to seek the benefit of the CECRA program and to provide further retroactive relief once this is concluded.
If you are concerned about how COVID-19 might impact your business, feel free to reach out to a member of our COVID-19 response team or Real Estate group.