How do I apply for the CECRA for small businesses? What is the CECRA program? The Canadian government just announced more emergency measures for small businesses to help weather Covid-19. However, this time the focus is on helping commercial landlords. Let’s explain this new program.
How Do I Apply For the CECRA – What is it?
CECRA stands for Canada Emergency Commercial Rent Assistance for small businesses. The goal of the program is to provide rental relief for small businesses. The government achieves this by providing forgivable loans to commercial landlords as an incentive to lower rents for their tenants.
How Do I Apply For The CECRA – How Does it Work?
First, the commercial landlord goes into an agreement with their tenant(s) to reduce their rent to 25% of normal rate for three months (April 2020 , May 2020, June 2020). The landlord will then take a loan from the Government of Canada to cover the other 75% for this time frame. If the landlord and tenant meet the program’s criteria, the landlord can have 2/3 of his/her loan forgiven. What does this mean in layman’s terms?
Suppose a landlord had a tenant who was paying $20,000 in rent each month. If the landlord wanted to be part of this program, they would go into an agreement to reduce their rent by 75% for April, May and June. This means the tenant would only pay $5000 per month for these three months. The landlord would then take a loan for $15000 per month for the three months from the government or $45000 in total. The landlord then can potentially have $10000 per month of the loan forgiven or $30000.
So what does this mean? it means that landlord will receive 75% of the required rent for these 3 months instead of 100%. The tenant will only pay 25% of their rent for same period. This means the landlord will incur a 25% loss in rent this time frame. But this amount is covered by the loan in which they pay back. Why would landlords choose to do this?
What is the Incentive for Landlords?
The government is banking on 3 reasons that landlords will apply for the programs. Here is a summary of the reasons from the Canada Mortgage and Housing Corporation whom the government is using to administer this program.
- There is an incentive of getting a government loan where potentially 2/3 of it could be forgiven.
- The landlord is guaranteed at least 50% of your rent for the months of April, May, and June. This is huge considering the alternative could be receiving NOTHING in rent if businesses can’t afford to pay.
- Finally, eviction and finding new tenants can be an expensive and time consuming process that could be very costly. So, perhaps landlords can prevent this altogether.
How Can I Apply For The CECRA Program?
You will need to go to the CMHC website. However, the application portal for this program will not be open until Monday May 25, 2020 at 8:00 am eastern time. And then the government will take a staggered approach for applying due to the expected high volume. Here’s the schedule from the the CMHC website below:
NOTE: Once registered, the portal will be available 24/7 for applicants to input data and upload documents.
| Day | Who should register? |
|---|---|
| Monday | Property owners who are located in Atlantic Canada, BC, Alberta and Quebec, with up to 10 tenants who are eligible for the program |
| Tuesday | Property owners who are located in Manitoba, Saskatchewan, Ontario and the Territories, with up to 10 tenants who are eligible for the program |
| Wednesday | All other property owners in Manitoba, Saskatchewan, Ontario and the Territories |
| Thursday | All other property owners in Atlantic Canada, BC, Alberta and Quebec |
| Friday | All |
What Information Will I Need to Apply For the CECRA Program?
There are a few pieces of information you will need to give to apply for the program. Here are a list below from the the CMHC website:
Attestations
- Tenant or Sub-tenant’s Attestation (sample PDF):
Property owners must have each of their eligible commercial small business tenants and/or subtenants sign an attestation. The Tenants are responsible for attesting to their eligibility with the program requirements. - Property Owner’s Attestation (sample PDF):
Property owners must sign an attestation. This confirms the information relating to the property owner and the property provided in the application is correct. And it attest to their eligibility with the program requirements.
Agreements
- Rent Reduction Agreement (sample PDF): All application documents will be accessible on May 25, 2020.
Property owners must enter into a legally binding rent reduction agreement with each impacted tenant. And confirm the rent reduction in accordance with the program terms and conditions. This agreement is conditional upon final approval of the application for CECRA for small businesses. - Forgivable Loan Agreement (sample PDF):
Property owners must agree to the terms and conditions in the application and outlined in the forgivable loan agreement.
You’ll also need to provide the following information:
Property owner information
- Property information includes: property address, property type, property tax statement, latest rent roll for each property and the number of commercial units
- Applicant information includes: banking information, property owner contact information, co-ownership information and contact details for co-owners
Tenant information
- Tenant information includes: tenant contact information, registered business name, lease area and the monthly gross rent for the period of April, May and June 2020
Conclusion
The CECRA program is a very detailed program. If you think you might want to apply, please go to the CMHC website and read it carefully. However, the amount of information provided could be overwhelming. Hopefully this summary helps you in understanding the program better. Which is important because this is a big decision to make and the stakes are high. Stay safe everyone.