How the Ontario-Canada Emergency Commercial Rent Assistance (“OCECRA”) can help small businesses

On April 24 2020, the Federal and Provincial Government have reached an agreement on the CECRA. Under this program, the government would cover 50% of the 3 monthly (April to June 2020) rent payments payable by eligible small business tenants. The OCECRA would be administered by the Canada Mortgage and House Corporation (CMHC) and would be available until September 30, 2020.

It also indicated from the Ontario Ministry’s newsroom that in order to qualify for the government funds, the 25% tenant rent payment obligations would not cover the property owner’s profit derived from rental income. In other words, the landlord must forgo the profit & only charge the tenant for the 25% of rent related to fixed costs.

Specific details are limited at this moment but the government plans to have the program up and running by mid-May. Hopefully more details will be provided soon, such as (i) how the fixed rent is determined, net or including TMI, or (ii) the test for the 70% revenue reduction of the tenant, etc.

To benefit from the program, both landlord and tenant must meet the following conditions:

For the landlord:

  • Agree to reduce tenant’s rent by at least 75% for the 3 corresponding months (i.e. April, May and June),
  • Not to evict the tenant while such agreement is in place, and
  • The 25% tenant rent payment obligations would not cover the property owner’s profit derived from the rental income.

Tenants Eligibility:

  • The tenants must be paying $50,000 or less in month rent.
  • The tenants have experienced at least 70% drop in pre-COVID 19 revenue or have temporarily ceased operations.

If all the conditions are met, the federal government will forgive the loan and repay the lender directly. Therefore at the end of the period, the government pays for 50%, the tenant pays for 25% and the landlord pays 25%.

Along with small businesses, charities and non-profit organizations will also be allowed to apply for this financial support.

 

Read the Ontario Government announcement here

 

This article is intended for general information purposes only and does not constitute professional advice.  Income tax law and regulation change frequently and the content on this article may no longer reflect the current state of the law. If you have any specific questions, you should consult a professional services advisor or email leo@awkcpa.com or alfred@awkcpa.com for further advice.