UPDATE – Canada Emergency Commercial Rent Assistance (CECRA) Program


On May 4, 2020 we summarized the CECRA forgivable loan program and advised that it left questions unanswered and conflicted with the Ontario OCECRA forgivable rent program.

The following is an update derived from information provided by Canada Mortgage and Housing Corporation (‘CMHC”), who will be administering the consolidated program under the name CECRA. The program will become operational on May 25, 2020.

CECRA will provide rent relief of over $900 million, in the form of forgivable loans to assist eligible small business tenants and commercial property owners. The assistance applies to rent obligations of tenants whose revenue has dropped at least 70%, as a result of COVID-19.

The deadline to apply for the CECRA program is August 31, 2020.

Previously, the Ontario Government released rules on the Ontario version of this program called OCECRA (Ontario-Canada Emergency Rent Assistance), indicating that it was only to reimburse certain fixed costs with no profit element. Ontario has since revised its OCECRA descriptions to confirm that it will be based upon gross rent.

The owner’s gross rental income for April, May and June 2020 (“eligible period”) will be shared as follows: Federal and Ontario governments – 50% (37.5%/12.5% respectively), landlord and tenant in aggregate – 50%. The tenant will pay no more than 25% of the rent.

Depending on the tenant circumstances and chances of rent recoveries, these program terms may be more appealing to landlords, as it will provide for a 75% gross rent recovery for the months of April, May and June 2020. The landlord will forfeit 25% of gross rent.

See Appendix I attached for a summary of gross rent inclusions/exclusions. Note that the monthly installments of estimated operating costs are included in gross rent, but the final reconciliation of amounts owing are excluded. Certain costs paid to the landlord, such as property taxes, are included in gross rent, but payment made directly by the tenant to third parties are excluded. Also note that insurance recoveries would reduce the gross rent calculation.

Conditions for the Program

The program will provide interest-free forgivable loans to eligible commercial property owners (“owner”) who may experience potential rent shortfalls due to their small business tenants being impacted by COVID-19. An owner (as per the sample owner attestation forms provided by CMHC), includes a commercial landlord of impacted tenants.

The owner does not require a mortgage to access the forgivable loan program. Funds will be transferred to the property owner’s financial institution.

The loan will be forgiven on December 31, 2020, provided the forgivable conditions are met. Note if an owner files for bankruptcy, restructures, reorganizes, dissolves or defaults, the loan will be repayable. CMHC will have full recourse to recover the funding from the owner.

Owners must apply for the entire eligible period and all impacted tenants must be included on a single application.

Landlords and tenants that are not at arm’s-length are eligible for CECRA if they have an enforceable lease agreement in place on April 1, 2020, that was not amended subsequently, and the rent is at market rates.

The forgivable loan can be applied for retroactively (but no later than August 31, 2020). If retroactive application is made, the landlord must refund/credit the tenant for rents paid in excess of 25% of the gross rent, for the eligible period.

Eligible commercial property owners generally do not include government owned properties.

Eligible commercial properties include commercial properties with a residential component. and residential mixed-use properties with a commercial component.

To be eligible for the forgivable loan, the following conditions must be met:

  1. The owner entered into a lease agreement with an eligible small business tenant (“eligible tenant”) on or before April 1, 2020.
  2. Property owners will have to reduce the rent of eligible tenants for the eligible period by at least 75%. The eligible tenant’s maximum rent will be 25% of the gross rent.
  3. The owner will enter into a rent forgiveness agreement with the impacted eligible tenant for the eligible period, with a moratorium on eviction. The rent forgiveness will include a promise to not seek rent increases to compensate for the forgiveness. The CMHC previously provided a sample rent forgiveness agreement on its website that has now been deleted.
  4. The proceeds of the forgivable loan are expected to be used to:
  • refund any rents paid by the eligible tenant, in excess of 25% for the eligible period, unless the eligible tenant agrees to a credit against future rent.
  • pay for property operating or financing costs.
  1. Ensure that the owner attestation and supporting documentation is accurate and truthful. The CMHC previously provided a sample owner attestation document on its website that has since been deleted.
  2. Ensure that the eligible tenant attestation is completed. The CMHC previously provided a sample attestation document on its website that has since been deleted.

Eligible small business tenants must meet the following conditions:

  1. Have “opened” prior to March 2, 2020. Presumably, this means began operations.
  2. Pay monthly gross rent payments per location of $50,000 or less, pursuant to a lease agreement.
  3. Have no more than $20 million in gross annual revenues on a consolidated basis based upon the 2019 fiscal period for financial reporting.
  1. Have experienced at least a 70% drop from pre-COVID-19 revenues. The revenue reduction will be determined by comparing gross revenue in April, May or June 2020 to:
  • The corresponding month in 2019; or
  • The average revenue of January and February 2020.

Revenue for June can be forecasted. Revenue is to be reported from ordinary activities in Canada, using normal accounting methods and excluding extraordinary items.

Non-profit organizations and registered charities must exclude non-arm’s length revenue and choose whether to include revenue from government.

If the eligible tenant provides any false or misleading information in the attestation, they will be responsible for all rent forgiven under the terms of their lease.

Eligible tenants who are in sub-tenancy arrangements are eligible if these lease structures meet program criteria.


The CMHC previously supplied sample templates for the agreements and attestations on its website. They were detailed and will require input from legal counsel.

Based upon the sample property owner’s attestation form that the CMHC previously provided on its website, footnotes 1 and 2, it appears that the “registered owner” applies for the forgivable loan on behalf of the beneficial owner. The nominee must have authorization to enter into the agreement.  This may entail review of bare trust agreements and joint venture agreements.

The intention is for the program to apply to sublease arrangements. It appears that the owner is still the applicant.

Gross rent excludes certain items such as reconciled adjustment payments (i.e. common area maintenance year end adjustment payments). These adjustments for the eligible period are forgiven pursuant to the sample forgivable loan agreement leaving the landlord exposed.

On the CMHC website in the CECRA question and answer area, the revenue calculation for the 70% revenue reduction test, refers to an average of April, May and forecasted June 2020. However, in the sample forgivable loan agreement, the impacted tenant term states the revenue reduction methods differently. The methods of determining the 70% revenue reduction, is to compare April, May or June 2020 to (i) the respective month of 2019, or (ii) the average of January and February 2020. These two communications do not appear to be in sync.

While qualification for the program and application for relief is the owner’s responsibility, there are numerous and complex terms that could potentially cause a default under the agreement. The owner should have up-front certainty relating to the forgiveness but that does not appear to be the case. Also notable is that the loan could be assigned to CRA for collections.

Of the sample documents that were provided by CMHC, it appears that the attestation forms are mandatory, and the rent reduction agreement is suggested.

Appendix I

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