Canada Emergency Rent Subsidy – Proposed Details

Proposed-details-CERS

The government has provided an update regarding the proposed details for the new Canada Emergency Rent Subsidy (CERS).  These proposed details are not yet in force and may be subject to change.  However, this is an update on what is currently being proposed and details that we know so far.

In many ways, the government is trying to mirror the Canada Emergency Wage Subsidy with this new program. 

Time frame:

Subsidy will be retroactive to September 27, 2020 and will run to June 2021.

These initial proposed details are for the first 12 weeks (or first 3 qualifying periods) to December 19, 2020.

Qualifying periods:

  • “Period 8” – September 27, 2020 to October 24, 2020
  • “Period 9” – October 25, 2020 to November 21, 2020
  • “Period 10” – November 22, 2020 to December 19, 2020

Subsidy Rates:

Revenue decline

Rental subsidy formula

70% or more

65%

50% to 69%

40% + (revenue drop – 50%) x 1.25

1% to 49%

Revenue drop x 0.8

Eligible expenses:

  • Commercial rent
  • Property taxes
  • Property insurance
  • Interest on commercial mortgages
  • Less: any subleasing revenue

Limited to details in agreements in writing entered into prior to October 9, 2020

Exclusions:

  • Transactions between non-arm’s-length entities
  • Mortgage interest for a property primarily used to earn rental income from arms-length entities

Limit:

Expenses for each qualifying period are capped at $75,000 per location and an overall cap of $300,000 shared among an affiliated group.

Eligible entities:

Generally align with eligible entities for the Canada Emergency Wage Subsidy program, including individuals, corporations, trusts, non-profit organizations and registered charities.

Revenue decline calculations:

Revenue calculations are based on revenue earned in ordinary activities from arms-length sources, using normal accounting practices.

Registered charities and non-profit organizations can choose whether or not to include revenue from government sources as part of the calculation.  Once chosen, the same approach would have to be applied throughout the program period.

Option 1: General approach

  • Decline is based on monthly revenues compared to monthly revenue in the previous year.  Entity would use the greater of the decline in the current month or the previous month.  (ie greater of September 2020 vs September 2019 OR October 2020 vs October 2019 – for the first qualifying period)

Option 2: Alternative approach

  • Entity can choose to calculate its revenue decline by comparing monthly revenue to the average of its January and February 2020 revenue.  Entity would use the greater of the decline in the current month or the previous month. (ie greater of September 2020 revenue vs January/February 2020 average revenue OR October 2020 revenue vs January/February 2020 average revenue)

Once an approach is chosen, this approach must be consistently applied for each of the 3 qualifying periods.
All applications must be made on or before 180 days after the end of the qualifying period.

Lockdown Support:

In addition to the rent subsidy described above, organizations may qualify for additional support if they are forced to cease operations as a result of a public health restriction.  The amount of the additional support is 25% of qualifying expenses.
Qualifying organizations must:

  • Qualify for the CERS;
  • Follow a public health order that:
    • Completely shuts down the location; or
    • Ceases some or all of the activities at the location and it is reasonable to conclude that the ceased activities were responsible for a decline in revenue of at least 25% at that location

Public health restriction is defined as:

  • Made under the laws of Canada, a province or territory
  • Limited in scope based on geographical boundary, business type or activity or risks associated with a particular location
  • Non-compliance is a federal, provincial or territorial offence or can result in a monetary penalty
  • In effect for at least a week.

If the public health restriction is only in effect for a part of a qualifying period, the lockdown support is pro-rated based on the number of days in the period the relevant location was affected.

This is what we know so far.  These are just proposed details and may be subject to change.

The expectation is that this program will be open and applications available later in November.

Author