Feds, Provinces To Cover 75% Of Rent Costs For Small Businesses For 3 Months

OTTAWA — The federal government is providing rent relief to businesses that can’t afford to pay their landlords at a time when their operations are seriously curtailed or shut down due to the COVID-19 pandemic.

The federal help, expected to lower rent by 75 per cent for affected small businesses, will be provided in partnership with the provinces and territories, which have jurisdiction over rents.

The Canada Emergency Commercial Rent Assistance will provide forgivable loans to qualifying commercial property owners to cover 50 per cent of rent payments by eligible small business tenants experiencing financial hardship in April, May and June.

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The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 per cent for the three corresponding months under a rent forgiveness agreement, which will include a pledge not to evict the tenant while the agreement is in place.

The small business tenant would cover the remainder, up to 25 per cent of the rent.

Affected small business tenants are those paying less than $50,000 per month in rent and who have temporarily ceased operations, or have experienced at least a 70 per cent drop in pre-COVID-19 revenues. The program is also available to charities and non-profit organizations.

The federal Canada Mortgage and Housing Corp. will administer and deliver the program.

Provinces and territories will cover up to 25 per cent of costs, subject to terms of agreements with Ottawa. They will also ensure implementation of the measures.

It is expected the new program will be operational by mid-May, with commercial property owners lowering the rents of their small business tenant’s payable for the months of April and May, retroactively, and for June.

With the first of the month just around the corner, Finance Minister Bill Morneau appealed to landlords to be flexible until the program is up and running.

Prime Minister Justin Trudeau promised Friday that Ottawa would soon “have more to say” about rent relief for larger businesses.

The Canadian Federation of Independent Business applauded many elements of the new program, but had some reservations.

The federation is concerned the program may be overly complicated and too reliant on landlords to administer, the group’s executive vice-president, Laura Jones, said in a statement.

Landlords might not bother with the program if it means absorbing some losses, even if their tenants badly need the help, the federation said. In addition, the threshold of 70 per cent in lost revenue might disqualify hard-hit businesses from getting help.

“This is welcome news but many business owners with dramatic revenue losses will not qualify for the program,” Jones said.

NDP MP Gord Johns, the critic for small businesses, echoed those concerns, and said the announcement falls short of the business-saving measures owners have been hoping for.

“For business owners whose landlords chose to not chip in and sign on, they still face the very real threat of eviction through no fault of their own,” he said.

Morneau said it’s in the best interests of landlords and business tenants to take part, since both are struggling under the public health conditions.

“The landlords also have been going through challenges because in many cases businesses have not been able to pay,” he said. “So we think this provides a very good incentive for both parties.”

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Trudeau said the government is working to help as many businesses as possible, but reminded people of the unprecedented crisis Canada is experiencing.

“Unfortunately this is something we are grappling with,” he said. “We know certain businesses are extremely hard-hit.”

Small businesses also have access to credit to help them through the crisis, he noted.

Financial institutions have provided interest-free credit of up to $40,000 to eligible businesses, and up to $10,000 is forgivable if the loan is repaid by the end of 2022.

Trudeau said it’s not clear yet how the country will move to reopen the economy, so the relief measures the government has put in place will be adjusted as things unfold.

This report by The Canadian Press was first published April 24, 2020.