Business

Rent relief key to restarting economy, not just covering costs of pandemic closures, say business advocates

While provinces ease into reopening their economies, questions swirl around the federal government's commercial rent relief program and whether it will work.

Shop owner says if government program falls short, 'it's going to be a bloodletting' for small businesses

A woman and her dog stroll past a boarded up store on Toronto's Queen Street West, on the edge of the city's downtown. James Dunne/CBC

While provinces ease into reopening their economies, questions swirl around the federal government's commercial rent relief program and whether it will work.

This week, small businesses and landlords are expecting more information on the Canadian Emergency Commercial Rent Assistance (CECRA) program. When Prime Minister Justin Trudeau announced the plan last month, he said it was expected to be operational by mid-May.

"We're all struggling to figure this out," said Laura MacNutt, owner of Kingspier, a vintage clothing shop in downtown Halifax, who is desperate for help on rent.

With surveys showing a large number of small businesses can't make rent payments and widespread concerns about how the program is set up, the pressure to launch CECRA is intensifying.

Fear of eviction and closure is spiking as some tenants worry landlords won't participate in the program. Meanwhile, landlords are concerned about being left exposed on mortgages or supporting tenants who are destined for failure.

Both sides see the program as complicated, and there's a consensus among those interviewed by CBC News that rent relief should cover more than the costs of pandemic closures to help restart the economy.

Laura MacNutt owns a vintage clothing store in Halifax. She said without long-term rent relief there will be a 'bloodletting' for many small businesses. (Ryann Farmer/Kingspier)

'Need to fix the rent problem'

Fear and physical distancing will hurt sales for months, MacNutt believes. Without longer-term rent relief and protection for tenants "it's going to be a bloodletting" for many small businesses, she said.

Laura Jones, vice-president of the Canadian Federation of Independent Business (CFIB), agreed.

If we want to see a successful reopening of main street, we're going to need to fix the rent problem.- Laura Jones, vice-president of Canadian Federation of Independent Business

"If we want to see a successful reopening of main street, we're going to need to fix the rent problem."

For Jones, rent relief must evolve alongside the recovery because safety practices in the new normal will be "very, very challenging" for businesses. 

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Tenants in trouble

CECRA is for small businesses that were forced to close or have lost at least 70 per cent of their revenue when provinces issued lockdowns due to the pandemic. Under the program, the government will pay 50 per cent of April, May and June rent, while the landlord and tenant are supposed to pay 25 per cent each.

For MacNutt, CECRA is a possible lifeline.

She moved close to Halifax's harbour last June and had big plans for this summer.

"Downtown tourism, cruise ships, all of that stuff. So I had an ambitious target," she said.

Now, she said she'll be lucky to make half the revenue she forecast.

After closing in mid-March and paying her sole employee, MacNutt had enough to give her landlord roughly 10 per cent of March rent and hasn't paid anything since.

The way CECRA is set up, it is landlords who must apply for the program, and MacNutt's landlord said they don't know enough about the terms or if they're eligible.

The landlord owns several properties in the city. It has cited its own financial issues and told MacNutt to pay her full rent for March and April.

The situation leaves MacNutt unsure about her future.

Her prospects for hanging on to the store long term are not good without rent relief.

"It's all overwhelming for sure." 

Jonathan Kolber in what should be a full classroom at one of his language schools in Toronto. He has nine locations and is worried some of his landlords won't wait for rent relief. (Yusuf Baykal Bozkurt/ILAC)

'Bleeding money'

Jonathan Kolber is a numbers man, holding both an MBA and a degree in actuarial science. But the founder of the International Language Academy of Canada (ILAC) can't calculate when his business will be back on track.

What he can tally is the rent for nine ILAC schools in Vancouver and Toronto.

"We are bleeding money," said Kolber.

Half of his landlords are supportive. The other half "are taking a very aggressive position on this issue." Kolber has received letters demanding payment and threatened with eviction.

Looking past the short-term pain of his schools having no revenue, Kolber is thinking about a long-term strain of classrooms hosting just four students instead of 15 or more.

That scenario convinced him rent relief needs to be phased out gradually as his restrictions are lifted and attendance returns to normal.

"If it's gonna last three months, it'd be one thing. If it's gonna last six months, it'd be another thing. If it's gonna last nine months, it's an entirely different story."

Harmel Rayat in the foyer of his historic office and retail building in downtown Vancouver. Rayat believes three months of rent relief will not be enough. (Tindi Chohan/Talia Jevan Properties )

Harmel Rayat, one of ILAC's Vancouver landlords, said many of the 17 tenants in his 10-storey historic building have asked for help.

Rayat currently has a rent deferral agreement with Kolber, but said he's interested in applying for CECRA on behalf of ILAC and other tenants who need it.

He also said the program will have to be extended.

"There has to be additional breathing room for small businesses," he said. 

Rayat suggested that after 90 days, the subsidy could be continued but reduced.

Landlords say program has problems

Some landlords are leery of the CECRA program.

Chad Griffiths is a commercial landlord and commercial real estate broker in Edmonton.

He said most landlords are eager to keep tenants and believe rent relief is a good idea, but many see significant problems with CECRA.

Chad Griffiths is a landlord and commercial real estate broker in Edmonton. He says landlords support rent relief but have issues with the CECRA program. (Lauren Griffiths)

One issue he identified is that while tenants and landlords suffer, mortgage-holding banks aren't losing any money.

"It almost appears that this is a way to make the bank whole," said Griffiths.

He also criticized the program as too complicated.

In fact, there was also confusion about CECRA because the government's initial statements implied that only landlords with mortgages could access CECRA.

Even Liberal MPs questioned officials from the Ministry of Finance about this last Monday.

It appears the problem is being addressed because the Canada Mortgage and Housing Corp. (CMHC), which is administering the program, now says on its website that "for those property owners who do not have a mortgage, an alternative mechanism will be implemented."

Griffith also is worried CECRA is "creating a wedge between tenant and landlord."

The landlord's power to decide whether or not a tenant can access CECRA has also inflamed advocates, such as CFIB and Save Small Business, which have called for that to be changed.

Protecting tenants, persuading landlords

Store owner MacNutt is realistic about rent relief and the pandemic's impact on small businesses like hers.

"Some of us are not going to succeed, and I may be one of those."

'Reopening and rent relief are very closely tied. If you don't get the rent relief you need, how are you going to reopen? says Laura Jones, vice-president of CFIB. (CFIB)

A CFIB survey found that 40 per cent of its landlord members are not interested in the CECRA program, while a third are unsure and only a quarter plan to apply.

Advocates say protecting small businesses from evictions related to pandemic closures and losses would compel more landlords to accept CECRA.

Recently, the City of Toronto and several provincial Chambers of Commerce joined the CFIB, Restaurants Canada and Save Small Business in urging all provinces and territories to ban commercial evictions, an order New Brunswick has in place.

Another approach would be to make CECRA mandatory.

The CFIB wants more businesses to have access to CECRA and says if it doesn't work, restarting the economy will stall.

"Reopening and rent relief are very closely tied. If you don't get the rent relief you need, how are you going to reopen?" said Jones.

WATCH | Trudeau government announces rent relief for some businesses:

About the Author

James Dunne

Producer, CBC News Business

James Dunne researches, produces and writes stories for the business unit at CBC News. He has a decade of experience in business programming, including on the shows Venture and Fortune Hunters. An award-winning videojournalist, he's also worked on special projects and as the late lineup editor for the World at Six on CBC Radio One.

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