October 9, 2020 | Danny J. McMullen
With the deadline for new applicants to apply for the CECRA program having passed and the federal government confirming that the deadline will not be extended, the federal government has promised that a new program is in the works that will be released shortly (https://www.bloomberg.com/news/articles/2020-10-05/companies-to-get-rent-relief-under-new-trudeau-covid-19-program).
The CECRA program provided some much needed rent relief, however it was regularly criticized by both landlords and tenants (https://www.reminetwork.com/articles/cecra-now-closed-to-new-applicants/). One of the primary criticisms of the program by landlords was that it required the landlord to agree to enter into a rent relief agreement with their tenant that would involve the permanent loss of 25% of the gross rent for any given month that they participated in the program. Under the CECRA program, the tenant would be required to be pay 25% of the gross rent and the CECRA loan for the month would cover 50% of the rent – this left landlords with a loss of 25%. The theory behind this ratio was presumably that landlords are in a better situation to absorb the 25% loss than their tenants. This was frustrating for many landlords, in particular smaller landlords whose real estate holdings are limited and who are very reliant on the monthly rental payments to cover the costs of operating the property and paying their mortgage costs.
Another criticism of the program was that it required the Landlord to apply for the assistance rather than the tenant. The program was entirely voluntary and reliant on the landlord applying – this left many tenants in a situation where their landlord did not apply and so they didn’t see any relief whatsoever. The program was also seen by many as being overly technical and difficult to apply for which did not ultimately encourage mass participation.
Based on early reports, it would seem that the new rent relief program will allow small businesses which are severely impacted by the pandemic to apply directly for rent relief. Whatever program replaces CECRA, hopefully it will take into account the criticisms described above and some of the other difficulties with the program and streamline the process to put control into the hands of the tenants which will almost certainly encourage more general participation.
We’ll be closely following the release of details related to any new federal commercial rent relief program as they are released and look forward to providing a summary in this blog. Stay tuned!