Landlords turn to lawyers as they apply for Covid-19 rent relief program

The Covid-19 pandemic has left many small businesses struggling to afford their monthly rent, but it has also meant hardship and lost income for their landlords. Government programs such as the Canada Emergency Commercial Rent Assistance are designed to help tenants by significantly reducing their rent obligation.

However, lawyers working with landlords on relief solutions for tenants say the sheer magnitude of a complex application process, which must be done by landlords, has slowed down the rollout of this relief, even though it helps landlords recoup a large portion of the rent owed.

Since the program was first launched in April, there has been increased willingness on the part of landlords to participate in the program, says Ali Baniasadi, Partner at KPMG Law LLP. Once they have their concerns and questions answered, and understand the requirements of the program, most landlords will opt to help their tenants.

He adds that landlords’ willingness to participate in the program has also been helped by the fact that most provincial governments have introduced eviction bans that prevent landlords from removing commercial tenants if the landlords are eligible, but have not applied to the CECRA.

Baniasadi says that while legislatures and courts do not often interfere in contractual agreements between commercial entities, this move to prevent evictions aims to encourage more landlords to participate in the program. More buy-in to the program would help small business tenants, Baniasadi says. A recent survey conducted by the Canadian Federation of Independent Business found that 30 per cent of small businesses could not afford their July rent without help.

The CECRA program can be a lifeline for commercial enterprises that have been hit hard by the coronavirus businesses, as well as commercial landlords, Baniasadi says. The program allows landlords of eligible small businesses to apply for forgivable loans to cover up to 50 per cent of the monthly rent owed by their tenants for the months of April, May, June, and July. In Quebec, this amount will be increased by a further 12.5 per cent. The CECRA requires landlords to forgive not less than 75 per cent of the rent, while the tenant is responsible for paying up to 25 per cent.

To qualify, a small business is required to have lost at least 70 per cent of its pre-pandemic revenue in the same months of the previous year (or if a new business, the months just before the pandemic.)

Only landlords can apply

Baniasadi says the application process for the CECRA can be lengthy and present a significant administrative burden, especially to landlords with multiple eligible tenants. The process of collecting information, completing forms from every tenant and submitting attestations can “require some heavy lifting” on the part of the landlord. As for smaller landlords, they may not have the infrastructure and human resources to easily participate in CECRA.

When presented with tools to make the process of applying for the rent relief program easier, and less expensive, landlords are much more willing to follow through on the program, Baniasadi says. In fact, KPMG Law developed such a tool after being approached by landlords who were having a hard time muddling their way through the program and approached the firm for help.

Gino Piazza, National Leader, Tax Transformation & Technology, KPMG Canada worked with Baniasadi on developing the tool. He says it automates the entire application process — including  producing forms, collecting tenant information, and automating submissions to the Canada Mortgage and Housing, which administers the program. Once they understand the requirements of the program and have a solution to more easily file for it, most landlords understand the benefits of the program.

Piazza points out that participating in the program means that landlords will get at least 75 per cent of their tenants’ rent covered by the program, which is “much better” than getting 100 per cent of no rent, and the fact that legislation prevents eviction of tenants if eligibility requirements under the CECRA are met.

For commercial landlords who may be thinking about applying, there is still time. Applications must be submitted by August 31, 2020. Even landlords who have started the application process are finding the automation tool is very beneficial, since in most cases the platform can easily integrate whatever information exists to date.