Unclear details driving landlords away from small-business rent-relief program

Small business owner Andrew Williamson is photographed outside his gallery, the Black Cat, in Toronto, on May 6, 2020. (Christopher Katsarov/The Globe and Mail)Christopher Katsarov/The Globe and Mail

Entrepreneurs across Canada are being hit by eviction warnings and default notices as both they and their landlords say Ottawa’s small-business rent-relief program is so flawed and unclear that many property owners have no plans to apply.

Prime Minister Justin Trudeau announced the Canada Emergency Commercial Rent Assistance (CECRA) program nearly two weeks ago. Under the program, Ottawa and the provinces would pay for half of small businesses’ rent for April, May and June with forgivable loans to the landlord, provided the tenants and their landlords cover the rest.

Landlords are expected to pay at least 25 per cent of gross rent costs; tenants, a maximum of 25 per cent, if they can demonstrate a revenue drop of at least 70 per cent. The landlords must apply, which many entrepreneurs say places their financial fate in someone else’s hands, and is forcing some out of their spaces.

Nearly two weeks after the announcement, confusion reigns. Many landlords and tenants are making decisions with outdated information, including that landlords’ property must be mortgaged to qualify for CECRA – a detail the federal government clarified on April 27.

Some accountants and lawyers are advising landlords that any portion of the rental income that could be considered profit would not be eligible, based on information on the Government of Ontario website – which Ottawa and the province told The Globe and Mail this week is outdated and incorrect. Ontario has not yet updated its website.

Landlords say their hesitation is rooted in this lack of detail and in some cases financial incentive, since CECRA requires them to absorb some of the cost – especially if they misinterpret the outdated profit requirement. Applications are expected to open in mid-May, but as entrepreneurs discover their landlords don’t plan to apply, calls have been rising for Ottawa to allow tenants to do it.

In a new survey of 4,720 small businesses, the Canadian Federation of Independent Business (CFIB) found that three in 10 entrepreneurs that qualify for the program are not sure their landlords will participate, while one in 10 know their landlord will not. Among 926 landlords surveyed, 41 per cent said they would not apply.

Paul Drysdale, co-owner of GTA Furniture Central Inc., in Brampton, Ont., is photographed on April 29, 2020. Due to the COVID-19 pandemic, Drysdale had to close his store. He paid part of his rent, but the property management company wants it paid in full, which Drysdale cannot, because business has dried up.Fred Lum

Sales at Paul Drysdale’s GTA Furniture Central store in Brampton, Ont., dropped 90 per cent, to about $3,000, last month, and he says his April rent was deferred to the end of the month. When Ottawa announced details of CECRA, Mr. Drysdale sent his property manager a cheque for one-quarter of his gross rent of $5,192.35.

The property manager told him his landlord didn’t intend to participate in the federal program. On May 1, Mr. Drysdale said he received an e-mailed letter from the property manager saying he was in default of his lease and had to pay April and May rent of $10,384.70 by certified cheque by midafternoon on Tuesday. The letter said the property owner intended to proceed with “remedies available to us,” which could eventually lead to eviction. The property manager for the landlord did not respond to a request for comment.

Although the Canada Mortgage and Housing Corp. has provided some details on how the program would work, lack of information about eligibility and when funds will flow has left some property owners confused.

“It may be still a bit too early for commercial landlords to commit to the CECRA program,” said Michael Brooks, chief executive officer of Realpac, a national association for the largest property owners in Canada. "Some landlords will choose to make other arrangements with tenants who were a problem pre-COVID.”

Many landlords contacted by The Globe said they had frustrations with CECRA, but declined to comment on the record. The CFIB says it has heard from both tenants and landlords that CECRA is deeply flawed.

Most small businesses are “extremely nervous” about eviction, said Laura Jones, CFIB’s executive vice-president, which is why the CFIB is lobbying governments to loosen the revenue-drop requirements for tenants, and to allow tenants to apply for CECRA if their landlord won’t.

“Landlords don’t want to be seen as the cartoon villain here,” Ms. Jones says. “There are always bad apples in the barrel – and that can be as true for tenants as for landlords.”

Seven years and a day after he got the keys to his exhibition space in Toronto’s Roncesvalles neighbourhood, Andrew Williamson heard from his landlord on May 2 that he wanted to evict him and list the space for rent.

Mr. Williamson had turned down a rent deferral agreement, hoping for a government relief program. When the program came, he sent his landlord the 25 per cent he would be required to pay under CECRA, but says the landlord told him the program didn’t apply to his business, Black Cat Artspace. The landlord, who issued a formal notice of eviction to Mr. Williamson late Wednesday, declined to comment.

“For CECRA measures to work, [the money] has to be delivered to the business owner to allow them to pay their landlord, and then the landlord is able to pay their mortgage and the chain continues,” Mr. Williamson said.

Ludovic Jan, who runs the Opus Salon in Kelowna, B.C., asked his landlord about CECRA as soon as it was announced, but just saw the May cheque for his rent of nearly $3,000 taken out of his account.

But, so far, he said, the property manager hasn’t looked into applying on behalf of the landlord because landlords without a mortgage on their property haven’t been told how to access relief.

Like many other landlords, the owner of Mr. Jan’s site “is interested in applying, but we are waiting for the details,” property manager Patricia Davies said.

A spokesman for Small Business Minister Mary Ng declined to say if Ottawa may let tenants apply. “We’ve heard that many landlords want stability, and don’t want to lose their tenants or guaranteed stream of income,” said Ms. Ng’s press secretary, Ryan Nearing. As structured, he said, CECRA “will give [landlords] that stability that many are looking for in this time of crisis.”

Frances Bula is a freelance writer in Vancouver