Government assistance for small business commercial rent


The federal government announced on April 24, 2020, the establishment of the Canada Emergency Commercial Rent Assistance program to support commercial tenants whose operations are disrupted by the COVID-19 pandemic and commercial property owners who are having difficulty meeting their mortgage and other fixed cost obligations.

The program will provide, through the Canada Mortgage and Housing Corporation (CMHC), forgivable loans applicable to qualifying commercial property owners to cover up to 50 percent of three monthly rent payments that are payable by eligible small business tenants during April, May, and June. In return, the owners will have to reduce or cancel the rents of the companies that are their tenants for these three months.

Currently, only commercial property owners with mortgages are eligible for Emergency Assistance.

Eligible small business tenants are businesses who pay no more than $50,000 in monthly gross rent per location, generate no more than $20 million in gross annual revenues, and have temporarily ceased operations (i.e. generating no revenues), or have experienced at least a 70% decline in pre-COVID-19 revenues. The Emergency Assistance will also be offered to non-profit and charitable organizations.

The CMHC forgivable loan will be cancelled if the property owner agrees to reduce the rent of the eligible tenant business by at least 75% for the three-month period and no less than three months. If necessary, the measure could be retroactive for the months of April and May. During this period, the owner’s right of eviction will be suspended, and the tenant will be able to maintain occupancy.

In the event that the reduction of rent is less than 75%, the forgivable loan granted by the CMHC may have to be repaid by the owner according to terms that will be established in future.

Commercial property owners have no obligation to apply for the Emergency Assistance program, although their tenants are eligible. Those who apply for the Emergency Assistance will be able to secure the payment of 75% of the applicable rent for the months of April, May and June, as long as the rent reduction granted is 75%. In such cases, the small business tenants that have agreed to this measure will benefit from a reduction in the rent, being only bound to pay 25% of the rent applicable for these months.

At this time, the application of the Emergency Assistance program and the terms of the CMHC forgivable loans remain unclear and raise many questions. For example, businesses that do not meet the above-mentioned eligibility criteria, but are really experiencing financial hardship, will receive nothing, including those whose revenues were cut in half while they remained open during COVID-19.

However, CMHC has summarized the requirements that must be met by owners of commercial property in order to qualify for the Emergency Assistance program, as follows:

  • own property that generates rental revenue from commercial property located in Canada
  • be the property owner of the commercial real property where the impacted small business tenants are located
  • have a mortgage loan secured by the commercial property, occupied by one or more small business tenants
  • have entered or will enter into a rent reduction agreement for the period of April, May, and June 2020, that will reduce impacted small business tenant’s rent by at least 75%

(note: a decrease of less than 75% should result in the repayment of the loan according to terms to be established)

  • the rent reduction agreement with impacted tenants includes a moratorium on eviction for the period of April, May and June 2020
  • have declared rental income on your tax return (personal or corporate) for tax years 2018 and/or 2019

CMHC intends to develop another mechanism, in collaboration with the Government, whereby owners of commercial property who do not have mortgages can benefit from similar assistance.

The federal government, which plans to introduce the Emergency Assistance in mid-May, will provide, in the coming days, more information on the details of the program. The deadline to apply is August 31, 2020.

By Alexandre Béchard and Mathieu Tremblay