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Friday, May 1, 2020

On April 24, 2020, additional details were announced respecting the new Ontario-Canada Emergency Commercial Rent Assistance Program (“OCECRA”). OCECRA is a joint federal-provincial initiative to provide forgivable loans to commercial landlords to support small business tenants that have been heavily impacted by the COVID-19 pandemic.

The federal government has stated that further details on OCECRA will be provided in the near future. As we await this information, we provide below a high-level Q&A of what landlords and tenants should know about how OCECRA will operate in Ontario.

1. Why is this program being implemented?

The stated purpose of OCECRA is to reduce the financial burden of rent for small business tenants to assist with the survival of their businesses through the COVID-19 pandemic.

2. How does this program work?

OCECRA loans will be available to commercial property owners with small business tenants that meet certain eligibility requirements respecting both landlord and tenant.

OCECRA requires the landlord and tenant to sign a rent forgiveness agreement, which must include a moratorium on eviction and a reduction by the landlord of at least 75% of the qualifying tenant’s gross rent for April, May and June 2020. Landlords are required to reduce monthly rent to 25% of gross rent. The forgivable loan from the provincial and federal governments would cover 50% of the gross rent, with the remaining 50% of such rent to be shared equally between the tenant and landlord. The overall intention is that the landlord, tenant, and federal and provincial governments will each be responsible for approximately 25% of gross rent.

Although early OCECRA policy announcements referred to ‘rent relating to fixed costs’, which was unclear, Canada Mortgage and Housing Corporation (“CMHC”) subsequently published program material indicating that loans will cover 50% of a tenant’s gross rent.

Early policy announcements with respect to OCECRA also referenced ‘mortgaged properties’, although OCECRA is not restricted to properties that are subject to mortgages. CMHC has indicated that alternative mechanisms will be implemented for owners who do not have a mortgage, and additional information will be outlined in the near future. OCECRA program details also indicate that funds will be advanced directly to the applicable mortgage lender.

3. Am I eligible to receive or benefit from the loan?

The Ontario government has identified certain requirements for tenants to qualify for OCECRA. In addition to the landlord qualifications relating to the property and the necessary agreement with the tenant described above, the landlord must have an ‘eligible small business tenant’, being one that:

a) pays monthly rent of $50,000 or less in gross rent payments per location

b) generates no more than $20 million in gross annual revenues on a consolidated basis at the ultimate parent level; and

c) is a non-essential small business that has temporarily closed or is experiencing at least a 70% drop in pre-COVID-19 pandemic revenues.

Whether a 70% drop in revenues exists will be determined either by comparing revenues in April, May or June to the same period in 2019 or by comparing average revenues for those months against January and February 2020.

The Ontario government has specified that landlords owning (i) commercial properties with a residential component or (ii) residential mixed-use properties with at least a 30% commercial component are eligible for OCECRA in respect of their commercial tenants.

Landlords must also demonstrate that they have declared rental income on their personal or corporate tax return for 2018 and/or 2019.

4. How do I apply and when can I get the loan?

OCECRA will apply retroactively and property owners may apply for assistance relating to the April-June period after that period has expired. While OCECRA is expected to be operational in mid-May and administered by CMHC, further details are required with respect to the application process, which is stated to be open for applications until August 31, 2020.

The federal government has stated that the forgivable loans will be disbursed directly to mortgage lenders as opposed to landlords or tenants.

5. How does this program really work?

OCECRA is structured to ensure cost recovery for landlords (ultimately directing funds to municipalities for taxes and to lenders for mortgage payments), although the landlords are required to contribute at least 25% of a tenant’s gross rent to qualify.

Consequently, landlords may only seek relief through OCECRA once they determine that they are unlikely to recover 75% or more of rent from the relevant tenant(s), assuming a low administrative burden to the landlord to pursue OCECRA. Landlords are likely to continue to favour deferral agreements directly with tenants rather than abatements, subject to assessing future eligibility through OCECRA.

Several questions remain unanswered with respect to OCECRA including those relating to the application process and the program’s applicability to various situations. We will continue to monitor government publications with respect to OCECRA as well as an expected program for larger tenants over the coming weeks.

If you have any questions with respect to the matters discussed above, please contact Jonathan Born at, Colin Romano at or any other member of our Commercial Real Estate or Tax practice groups.

This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.

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