Retailers Face Uncertain Future as Commercial Rent Relief Program Ends in Canada

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The much-maligned Canada Emergency Commercial Rent Assistance (CECRA) program has expired, but small business experts expect a new, revamped — and hopefully improved — initiative to be launched in the coming days by the federal government.

AS CECRA EXPIRES SMALL BUSINESSES HOPE FOR NEW INITIATIVES FROM FEDERAL GOVERNMENT

Jon Shell, Managing Director & Partner of Social Capital Partners in Toronto, and co-founder of the Save Small Business grassroots coalition, said the previous extension of the CECRA program has been a “copout for several months”.

“I’m hoping what this means is they’re working on a better approach going forward,” he said. “You have to understand that only a very few small businesses get access to CECRA so continuing to extend it for a tiny minority of small businesses doesn’t make a lot of sense.

“I’d much rather see the money be reoriented to other small businesses whose landlords did not apply (for CECRA).”

The main criticisms surrounding CECRA were that it relied on landlords to opt into the program and the threshold for loss of revenue for businesses to apply was too high — Impacted small business tenants were businesses paying less than $50,000 per month in rent and who had temporarily ceased operations or had experienced at least a 70 percent drop in pre-COVID-19 revenues.

“Small businesses that are starting back up again are facing a massive amount of deferrals. There’s rent. There’s utilities. There’s taxes. And all of that is debt. So anyone opening now is opening with this massive overhang of debt in the form of deferrals and in order for them to survive people are going to need some sort of help,” said Shell.

“So far we’ve staved off some closures because of deferrals but as deferrals come due, as evictions become available again as an option for landlords, in what is at best a tepid recovery for small businesses, you’re definitely going to see some other businesses go out of business.”

MANY SMALL BUSINESSES ARE NOT OUT OF THE WOODS AFTER COVID-19 PANDEMIC

Laura Jones, executive vice-president with the Canadian Federation of Independent Business, said many small business owners are not out of the woods yet in terms of their economic recovery.

“And rent is a very big bill. So having no rent relief program is problematic for many business owners. Many have been shut out of the (CECRA) program so this is nothing new and it just compounds a problem that’s already existed,” she said. “Others are really trying to climb back but even those that have had the help this is expiring much earlier than the wage subsidy which is set to go through December.”

Jones said she is hopeful that new Finance Minister, Chrystia Freeland, recognizes the “incredible unfairness that has been baked into rent relief and will work to fix that”.

“I’m hopeful that what might be going on here is that we’ve seen no extension of CECRA because they’re going to evolve it into something that works better for everyone. That’s the hope. But you can’t take hope to the bank,” she said, adding that on Monday comments from the Finance Minister and the Small Business Minister seemed to indicate they understood there were significant problems with rent relief.

“That’s hopeful but it was a bit of a missed opportunity to give business owners some assurance. Uncertainty is incredibly challenging at the best of times and we are not in the best of times. Rent is due (September 1) and even if they don’t have all of the fixes ready to go just saying they’re working on it would have been some comfort that business owners didn’t get.”

Patrick Gill, Senior Director of Tax and Financial Policy for the Canadian Chamber of Commerce, said the organization has been actively talking to the government.

“And through those conversations they realize the importance of the program and the need to extend it,” said Gill. “We’re optimistic that an extension may happen but the type of format and how long that extension may be and what’s also wrapped up in other tweaks with the program that’s yet to be seen.

“But I wouldn’t be surprised if CECRA is going to continue to be there for commercial tenants in the future during this challenging time.”

EXPERTS SAY RENT ASSISTANCE PROGRAMS ARE IMPERATIVE FOR SMALL BUSINESS SURVIVAL

Gill said it is incredibly important for business owners to have some sort of rent assistance program in place.

“This is probably one of the most important of the emergency supports out there for businesses and their workers. When it comes to main street businesses, overhead rent is one of the largest costs of their business. This has been a very challenging circumstance for them in that revenues and customer demand revenue has been down for a number of months. But many of them have not been offered any deferral on payments or their landlords haven’t applied for the program,” he said.

“So it’s been a very big struggle for commercial tenants. When revenues are down, it would be greatly appreciated this help during this time to get them through.”

He said the Chamber would like the program extended into the fall and winter and it is looking for more flexible criteria to make sure the program can be more accessible to tenants.

Karl Littler, Senior Vice President, Public Affairs at the Retail Council of Canada, said he’s heard that the government most certainly will extend the program but it is looking at the program’s design.

“I don’t think anybody would say that it has been a resounding success save and except for those it has been successful for,” he said. “But obviously if they’re going to do a redesign they’re not going to do it for one month. It’s all conjecture at this point but I am not presuming that the thing is over.

“It’s hugely important for those to whom it’s relevant. There are some people whose curve of recovery is much slower and has not fully kicked in like other parts of retail have. And so for those entities it’s every bit as important today as it was for the others two or three months ago.”

David Lefebvre, Restaurants Canada Vice President, Federal and Quebec, said “the federal government is telling us that they understand the program (CECRA) was not working well enough so they’re working on some kind of new proposition. Unfortunately we have no timelines but understanding that the market will require to have something pretty soon because now there’s nothing”.

“It’s absolutely important and crucial, especially for those that have been shut down for a while because of COVID. In all fairness for those who were shut down, especially for a few months, there should be some kind of rental support or support for the fixed costs that they incurred while they were closed,” he said. “And definitely to make the program better as businesses reopen and can transition from being an emergency support and geared more toward business continuity.”

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