Surrey Board of Trade wants changes to Commercial Rent Relief Program

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While the Canada Emergency Commercial Rent Assistance (CECRA) program was announced a month ago, it is only within recent days that the public has been able to see and understand the details of the CECRA program. Until now, the government explained the program as follows: the government will pay 50% of your rent, the landlord will cover 25%, and the tenant will only have to pay 25%.
Unfortunately, this has been an over-simplification of the program. “What businesses are discovering is that there are more requirements, expectations and costs associated in participating in the program,” said Anita Huberman, CEO, Surrey Board of Trade.
These are just some of the items to consider under the current program:

1. Owner’s (Landlord’s) Attestation:
= For the tenant to receive the benefit, the landlord must complete the application.
Under the plan, the landlord is covering 25% of the tenants rent. Landlords are often already financially stretched to make mortgages to their financial institution and often over leveraged to make these payments without supporting rent.
= The landlord must sign and provide an Owner Attestation with the application.
= The government has made the landlord responsible for providing and confirming the accuracy of the tenant’s financial information and eligibility for the program. This requirement should fall upon the government and not fall upon the landlord to verify accuracy.
= Because the government is making the landlord responsible for confirming the accuracy of the tenant’s financial information, the landlord will have to perform its own audit of the tenant. Aside from the time and expense involved in this requirement under very challenging times, the landlord is unlikely to obtain this information in many instances and has never been required to be provided to the government in the past. It should not fall upon the landlord to collect this information but, rather, be reported to the government directly by the occupant.
= The landlord must disclose information about all tenants in the property, even if they are not seeking assistance through CECRA. Again, this is an infringement on privacy rights and should not be a requirement for the landlord to obtain.
= The landlord must allow the government agency to use and share the financial information it discloses in the application with “other organizations”, which could include the Canada Revenue Agency.

2. Tenant’s Attestation:
= The tenant must sign and provide a Tenant Attestation and provide it to the landlord to submit with the application.
= The tenant must disclose its gross annual revenues and declare that its gross monthly revenue during April, May and June, 2020 are at least 70% less than during the same period in 2019 (or if the tenant is a new business and was not operating in 2019, at least 70% less than average revenues for January and February 2020).
= The tenant must allow the government agency to audit its financial records and any other documents, records or information pertaining to the Tenant Attestation.
= The tenant must declare that it has pursued all other sources of non-repayable funding including insurance coverage. It is unclear whether an insurance claim must have been filed. Requirements such as this impose criteria on tenants not seen for other financial assistance and create restrictions that prevent access to the rent relief.

3. Loan Agreement:
= The landlord is required to enter into a “Property Owner Forgivable Loan Agreement” with the government agency (CMHC).
= The landlord must represent and warrant that all information, including all information provided by the tenant, is true and accurate. Aside from the time and expense required to undertake this requirement, this requirement is both impractical and likely very difficult for the landlord to attest to. The federal government should be responsible for this requirement not the landlord.
The landlord must allow the government to perform an audit of the landlord’s records. This imposes an unwarranted and is an infringement on the landlord’s rights for a benefit given to the tenant.
= If the tenant’s information is inaccurate, the government is entitled to demand the 50% from the landlord, in which case, the landlord is responsible for collecting the 50% from the tenant. The government has downloaded the responsibility and cost of verifying information to the landlord for a benefit that will only benefit the tenant and cost the landlord time, money and what amounts to a 25% rent subsidy to the tenant by the landlord. To severely penalize the landlord for possible inaccurate reporting by the tenant is unreasonable and should be an agreement between the government and tenant.
= Even though the rent is due for April, May and June, the government is not obligated to provide the 50% until August 31, 2020. This is an issue because after entering into the Agreement and before paying the 50%, the government is allowed to terminate the Agreement (and not advance the 50%) if the government decides that it does not have not sufficient funds or CMHC determines that the tenant is not eligible. Further, a delay in providing the funding can potentially create serious financial hardships, bankruptcy and potential closing of business.
= Even if the government later decides not to pay the 50%, the program requires the landlord to sign a rent reduction agreement with the tenant that could prevent the landlord from recovering the lost rent from the tenant.
= The landlord’s rights under its lease with the tenant are suspended until September 1, 2020 or later. This puts a moratorium on the landlord for a minimum of 3 months. If the tenant is in default of the lease for reasons other than non-payment of rent, the landlord cannot do anything until September 1, 2020 or later. This puts the safety of the property and other tenants at risk.

The above are just some of the examples of the onerous and unreasonable conditions that the government is imposing on landlords that may prevent landlords from applying for assistance under the CECRA program.
“Most landlords want to work with their tenants and help their businesses – we are all in this together,” continued Huberman. “But landlords can’t be asked to assume the risk put on them by the government with this program. The risk is associated with an initiative such as this must reside with the government.”
“The program could work well if changes are made.”
For instance, under the present rent relief program for residential tenants, it is the tenant who applies directly to the government for rent relief. Within days of the application, the government sends funds directly to the landlord’s bank account on behalf of the tenant. The landlord has no involvement in the application or the representations made on behalf of the tenant, and the tenant receives almost immediate
relief.
The Surrey Board of Trade will continue to communicate with both the Provincial and Federal Governments asking them to simplify the program and to be more in line with the residential rental assistance program. The government can take applications for relief from the tenants and, on approval, provide the 50% of rent to the landlord on behalf of the tenant. The landlord and the tenant could then be left to make arrangements for the balance, if further assistance is required.