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Bulletin | Covid-19

Preliminary Details Emerge for the Ontario-Canada Emergency Commercial Rent Assistance (OCECRA) Program

Fasken
Reading Time 3 minute read
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Real Estate Bulletin

The Ontario Government announced on Friday April 24, 2020, the creation of the Ontario-Canada Emergency Commercial Rent Assistance (“OCECRA”) program. 

As discussed in our previous bulletin - Federal Government Announces Joint Initiative with Provinces and Territories to Implement Canada Emergency Commercial Rent Assistance Program - the OCECRA will provide forgivable loans to eligible Ontario commercial property owners and rent relief for eligible small business tenants who have been heavily impacted by the COVID-19 crisis.

Some preliminary details of the OCECRA are provided below:

  • Contribution from Ontario:  The Ontario Government is committing $241 million to partner with the Federal Government in the ultimate goal of delivering more than $900 million in urgent relief to small businesses and their landlords across Canada.
  • Administration of the Loans:  The OCECRA will be administered by the Canada Mortgage and Housing Corporation (CMHC) and will be available until September 30, 2020. Support would be retroactive to April 1, covering April, May and June 2020.
  • Eligibility Requirements for Small Business: An eligible small business tenant includes:
    • non-essential small businesses that:
      • have temporarily closed or are experiencing a 70% drop in pre-COVID-19 revenues (determined by comparing revenues in April, May or June to the same month in 2019 or alternatively compared to average revenues for January and February 2020); and
      • pay monthly gross rent that does not exceed $50,000.00; and    
    • not-for-profit organizations or charitable entities.

The following small business tenants will be expressly excluded from the program:

  • entities owned by individuals holding political office;
  • entities that promote violence, incite hatred or discriminate on the basis of race, national or ethnic origin, color, religion, sex, age or mental or physical disability; and
  • an entity in a lender’s special accounts or restructuring group prior to March 1, 2020.

Eligibility Requirements for Commercial Property Owners:  The OCECRA will apply to the following commercial property owners with eligible small business tenants:

  • The commercial property owner must be the registered owner of the property;
  • The commercial property must be subject to a mortgage.  If the property owner does not have a mortgage secured by a commercial rental property, the property owner is encouraged to contact CMHC to discuss program options, which may include applying funds against other forms of debt facilities or fixed cost payment obligations (e.g. utilities);
  • The commercial property owner must reduce the rental costs of eligible small business tenants for April to June 2020 by at least 75 percent;
  • Commercial properties with a residential component and residential mixed-use properties with at least 30% dedicated to commercial use, will be eligible for support with respect to their commercial tenants; and
  • The commercial property owner and eligible small business tenant must enter into a “Rent Forgiveness Agreement” which stipulates the following:
    • a moratorium on eviction for the three-month period of the loan;
    • the eligible small business tenant’s monthly rent will be reduced to 25% of rent that relates to fixed costs for three months;
    • the commercial property owner would be responsible for the remaining 25%; and
    • the government funding, and remaining monthly tenant rent payment obligations (i.e. 25%), will not cover the commercial property owner's profits derived from rental income - that is, in applying for this program, the property owner agrees to forego profit for a three-month period.

Further details on the program are set to be announced in the coming days/weeks and we will be providing updates as they become available.

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