Canada Emergency Rent Grant (SCRU): New Direct Emergency Rent Subsidy for Businesses | Blake, Cassels & Graydon LLP

On November 2, 2020, the federal government set the framework for the Canada Emergency Rent Grant (CRS), introducing Bill C-9 An Act to amend the Income Tax Act (Canada Emergency Rent Grant and Canada Emergency Wage Subsidy).

The ESRB is a new program to support Canadian businesses affected by the COVID-19 pandemic and replaces the now expired Canada Emergency Commercial Rent Assistance Program (CECRA). The ESRB will provide rental assistance directly to tenants.

CERS DETAILS

Although at the time of writing the legislation is still in draft form, it appears that the ESRB will operate as follows:

• The ESRB will provide direct rent assistance to eligible tenants without the need to work through their landlords. In other words, no rent relief agreement will need to be made between tenants and landlords, although we suspect that for some tenants the funds received under the ESRB will be insufficient and, as such, they could ask their landlords for additional rent relief.

• The new program is structured like a grant and not like a forgivable loan like CECRA. Therefore, no loan agreement is required. We understand that the federal government will seek to expedite payments (via direct cash deposits) to qualifying tenants.

• To be eligible for the ESRB, businesses, charities and non-profit organizations must have experienced a drop in income. In such a case, eligible organizations will receive a percentage of their expenses reimbursed, on a sliding scale, up to a maximum of 65 percent of eligible expenses. To be eligible for the maximum grant of 65%, a tenant must have suffered loss of income of at least 70%. In such a case, for example, a tenant with a monthly rent of CA $ 10,000 would receive a grant of CA $ 6,500 from the ESRB. However, a tenant can claim up to a maximum of CAD $ 75,000 in rent per location, per qualifying period (approximately one month), and that same tenant, as well as its affiliates, can claim up to a maximum. total of CA $ 300,000 per period. for all its locations. It is understood that, although the maximum rent is CA $ 75,000, the maximum grant from the ESRB is 65% of this CA $ 75,000, which represents a maximum grant of CA $ 48,750 for a reference period.

• Unlike CECRA, there does not seem to be any restriction on the types of tenants (large or small) who can apply for the ESRB. However, if a tenant pays more than the maximum amounts of CA $ 75,000 / CA $ 300,000 described above, they can still claim the first CA $ 75,000 / CA $ 300,000 under the CERS.

• Additionally, a supplement of up to 25 percent (called Lockdown Support) will be made available to organizations that have been forced to shut down for a period of at least a week due to public health restrictions (i.e. that is, an order or decision of an eligible public health authority issued in response to the COVID-19 pandemic), in addition to the aforementioned 65 percent grant (for a total of 90 percent) . Since the 25% top-up is based on the length of the shutdown, it will vary on a sliding scale for organizations that have not closed for the entire period.

• The ESRB comes into force on September 27, 2020 and will be available to tenants until June 2021. However, after December 19, 2020, the federal government will have the option of adjusting the current framework and making the necessary adjustments to the rates, grant amounts, thresholds, etc.

• Due to what appears to have been a drafting error in Bill C-9, tenants will have to pay their landlord before they can apply for an ESRB. As of this writing, it remains to be seen whether this issue will be rectified in order to allow tenants to access the subsidy before paying rent.

IMPACT

With the announcement of a new commercial rental assistance program, it is interesting to look at the impacts of its predecessor, CECRA.

As of October 2020, the Government of Canada had provided more than C $ 1.8 billion in rent assistance through CECRA for small businesses, but despite this, the program has faced significant criticism since its announcement. April 24, 2020. On the one hand, the program was voluntary. , which meant that tenants whose owners had moved away were not eligible to receive CECRA benefits. CECRA also imposed a threshold for loss of income which automatically disqualified certain companies which had still suffered significant losses. Finally, the program only covered businesses that paid up to CAD $ 50,000 in monthly rent.

Even though the federal government appears to have corrected some of CECRA’s shortcomings, criticism is already starting to surface regarding the ESRB, but we have yet to see the impacts of this new program, which the government says will be more accessible and best suited to the needs of tenants. One thing is certain: the ESRB is coming just in time for owners and tenants in the commercial real estate industry who were worried about the end of CECRA.