By Graeme Swainson and Ryan Kemp

Last Friday, the federal government announced the Canada Emergency Commercial Rent Assistance (“CECRA”) program, the available details of which can be accessed here

The currently available details of the CECRA program raise many questions for both commercial landlords and tenants, some of which we outline and discuss below.

Q: My tenant has asked for rent forgiveness under CECRA. Am I required to provide it? 

A: No. 

CECRA is an optional program that will provide forgivable loans to landlords provided they, and their tenants, meet certain eligibility criteria. It is not a mandatory program, and the discretion whether or not to “opt-in” lies with the landlord, not the tenant. While CECRA has been characterized as a federal assistance program aimed to help small businesses struggling with the effects of COVID-19, we suggest it is better characterized as a federal loan program to assist commercial landlords in dealing with smaller tenants struggling with the effects of COVID-19. While this is a small distinction, it is an important one, especially with tenants who may think they are automatically entitled to a reduction in rent simply because of the announcement of the CECRA program. Landlords will need to evaluate their particular tenant mixes to determine whether to opt-in, as not all tenants have felt the impacts of COVID-19 uniformly, and it may very well be that some landlords will see a benefit from taking the 50% rent guarantee provided by the CECRA program, while others may not.

Q: How do we qualify for CECRA, and how does work?

A: In order to qualify:

  1. The landlord is required to enter into a written agreement with a tenant that forgives rent for the months of April, May and June 2020, by at least 75%, and prohibits the landlord from evicting the tenant during that period;
  2. The tenant must pay less than $50,000 per month in rent and has either shut down due to COVID-19, or experienced at least a 70% decline in pre-COVID-19 revenues; and
  3. The land upon which the premises leased to the tenant is located must be subject to a mortgage.

As long as the rent forgiveness agreement is adhered to (i.e. rent is actually reduced by the amount specified and no eviction takes place), the loan will be forgiven in full. The loan proceeds are to be ultimately paid over to the landlord’s mortgagee, and applied against the mortgage.

At this time, there are a lot of uncertainties surrounding the qualification requirements and how the program will be distributed. Just a few examples include:

  • Is the application specific to the landlord, or will landlords need to make separate CECRA applications for each tenant and/or for each property?
  • How is the decline in the tenant’s revenue calculated (i.e. year over year, month over month, etc.)?
  • Is the rent threshold applicable to a particular premises, or the total space the tenant leases in aggregate (i.e. what if a tenant leases 2 spaces at $30k/month/lease)?
  • If the lender has been paid all principal and interest owing to date, are they now required to accept a prepayment of principal without penalty?
  • What if there are two mortgagees? Are they to receive loan proceeds proportionately?
  • Is the moratorium on evictions limited to monetary defaults, or does it apply to all defaults (i.e. can a tenant be evicted for things such as damaging the premises or failing to insure)?

We hope to see more clarity on these issues, amongst others, in the coming days and weeks once more details on the CECRA program become available.

Q: What if I have already entered into rent deferral agreements with tenants?

A: It depends.

Many landlords have been proactive in working directly with their tenants to come up with solutions during this pandemic, often involving a written agreement which defers (but does not forgive) rental payments for a specified period of time. These arrangements are often beneficial for both parties, as the tenant is not required to pay rent when it is generating little or no revenue, while the landlord maintains the right to receive the total amount of the agreed-upon rents over the term. 

We have been assisting landlords in documenting these rent deferral arrangements, and it is our view that these landlords should not be penalized for being proactive before the CECRA program was announced, either by having to incur increased legal and administrative cost in further amending their leases, or by having to accept a 25% loss in rental revenue that the CECRA program does not cover. Landlords with tenants, who, despite a reduction in revenue, may have the financial wherewithal to pay 75% of the rent payable for April, May and June 2020 on deferred basis, may want to avoid the program altogether, and not deviate from deferral arrangements already agreed-to. On the other hand, the CECRA program could provide the most attractive option for landlords who have tenants that, because of the effects of COVID-19, are unlikely to be able to pay rent plus any rents deferred once the deferment period is over.

Q: Do I need the consent of my mortgagee in order to defer or forgive rent?

A: Maybe.

The mortgagee’s security documents will dictate whether consent it required. If so, mortgagee consent is de facto an eligibility requirement to participate in CECRA. Many Assignments of Rents and Leases will include a provision that stipulates that any amendment to the leases currently in place requires the consent of the lender. Some will require consent in order for the landlord to agree to forgive rent, but that is not always the case with respect to deferrals. As such, and in order to ensure a landlord is not offside its mortgage, we would encourage landlords to consult with their mortgagees before agreeing to any deferrals or forgiveness of rent. As funds payable under the CECRA program will ultimately end up in the hands of the mortgage lender, we recommend landlords work closely with their lenders throughout the pre-application process to ensure that payments are kept up to date while no inadvertent prepayment will occur once the program proceeds are received.


If you have any further questions about the CECRA program or dealing with tenants during the COVID-19 crisis, we invite you to reach out to one of the members of the Brownlee LLP real estate group to discuss.