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|CECRA Q&A With Finance Canada|
Justin To has worked as the Deputy Chief of Staff & Director of Policy for Finance Canada.
Read Justin's answers below to questions posed by Sheamus Murphy, Vice President, Federal Advocacy at Counsel Public Affairs Inc., regarding CECRA on June 7th.
Having heard this week that the 70% revenue threshold will be based on a 3-month average, can we apply for a tenant for only one or two months instead of 3 months?
It applies to all three months, cannot go month by month. The Tenant Attestation says that the Tenant must simply estimate “to the best of their knowledge” whether they are down an average 70% for the three months, including a projection on June. If they
are wrong, they are wrong and CMHC will not come down hard on those who have made reasonable efforts to estimate the loss in revenue to the best of their knowledge. (as an example of that, a business that was shut 100% in April and May but even had
90% sales in June, would still be on average down 70%)
Where a property has a mortgage, does the property owner’s lender need to approve our CECRA application per building? Our house banker (one of big 6 Schedule I banks) suggested this week that they have to sign off on every CECRA application, unbeknownst to us.
I can’t answer this question as it may be a covenant between a property owner and their bank. As far as I understand, there is no requirement by CMHC that a property owner must also provide a waiver from their financial institution as participation in the program.
Further clarification and details on what the eligibility process looks like for subtenants would be appreciated.
I’m not sure I understand this question as subtenants are fully eligible for the program. In fact the Tenant Attestation is actually titled “Tenant’s and Sub-Tenant’s Attestation”
Impacted small business tenants are businesses — including non-profit and charitable organizations — that:
NOTE: Eligible small business tenants who are in sub-tenancy arrangements are also eligible, if these lease structures meet program criteria.
# 9 of the Rental Reduction Agreement states that if the 2020 CAM & Tax reconciliation of the actual hard, fixed maintenance costs results in a credit owing to the Landlord, the Landlord must allow a full 75% reduction of such credit, yet there is currently no mechanism for the Landlord to recover the 50% government commitment in the original arrangement at the time the 2020 reconciliation is completed (early 2021). Is this something that could be addressed? In other words, where a credit is found to be owing to the Landlord, and it is reduced by 75%, can the Landlord submit to the government for 50% of that credit owing? Alternatively, can the credit only be reduced by the 25% loss committed by the Landlord when agreeing to participate in the program? Also, there is no mention of what happens with a credit to the tenant – it should be adjusted the same way, reduced by 25%
Not sure how to answer this question other than to state it should all be reflected in section #4 of the Rental Reduction Agreement when the property owner submits the value of the “gross rent” submitted within the application. If the gross rent is accurate then this should be addressed. I’m not sure how any reconciliation would be corrected in the property owner or the tenant’s favour if an adjustment should occur. You’d have to talk to CMHC officials on that one.
Whether the sales figures used to determine qualification are for the Tenant’s whole business (multiple locations), or just the sales for the location being applied for (our property)?
Sales for the location only, not consolidated business
Omission in #11 of Tenant attestation the $20 million revenue max): should add “on a consolidated basis at the ultimate parent company level” which is what the portal indicates is the qualifier.
I’ll check into that
What if as part of a multi-tenant building application with multiple tenants applying for assistance one or more of the tenants is deemed not to qualify, how does that impact the balance of the application? Would the loan still be approved
for those that qualify in the same building or does that building owner need to re-apply?
The property owner should only be applying on behalf of their tenants that qualify, meaning there may be some tenants, the ones that do not qualify, are left out of the application. If the property owner applied for let's say 3 of its tenants in one building but one was later found to not qualify, then, as per the Property Owner Attestation and the Loan Agreement, the property owner should contact CMHC, the loan will be adjusted and reasonable efforts should be made to recover the rent from the tenant that did not qualify.
Does the application need to be on behalf of the bare trustee given they will be reflected on title or can the beneficial owner make the application?
As I understand it, the application should be filed by the entity listed on the lease agreement.