As a means of helping Canadian small businesses overcome financial obstacles during the coronavirus pandemic, the federal government unveiled the Canada Emergency Commercial Rent Assistance (CERCA) program. Under the program, commercial landlords that apply will be required to forego 25% of their incoming rent, while the federal and provincial governments subsidize the tenant’s remaining rent portion up tp 50%. Although the program is generated towards helping the small business in question, there are a lot of landlords that are not feeling generous during these unprecedented times.
It appears that there is a lack of incentive for commercial landlords to apply for CERCA. The program was unveiled in April, and became open to applications on May 25; however, only 26,000 tenants have been successfully covered under the program as of June 4. The federal government had earmarked $3 billion for the program, but only $90 million has been subsidized thus far. As a result, both Quebec and Ontario provincial governments had to step in to ensure that small businesses are getting the financial relief they need.
Quebec’s economy minister Pierre Fitzgibbon unveiled that the provincial government will decrease the landlord’s forgone rent from 25% to 12.5%, as well as enforcing a temporary ban on evictions between June to September. Ontario has implemented similar measures, with Premier Ford scolding “greedy landlords’ for refusing to help small businesses. As a result, Ontario has also imposed a temporary ban on evictions which will be valid from June to the end of August.
However, commercial landlord lack of cooperation is not the only reason the federal government’s CERCA program is not deeming as much success as was anticipated. According to the Canadian Federation of Independent Business, the program has been found off-putting by some, given the off-putting criteria that requires a tenant to lose a minimum 70% of their revenue in order to be eligible. Also, both landlords and tenants have found the application process rather confusing and difficult to navigate.
Information for this briefing was found via Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.