In order to keep Ottawa business leaders informed in this unprecedented health and economic crisis, OBJ is conducting a series of discussions over the coming weeks with members of Ottawa's business community. This special episode of Coping With COVID-19 is sponsored by Perley-Robertson, Hill & McDougall LLP.
In this Coping with COVID-19 podcast episode, OBJ publisher Michael Curran speaks with Joshua Moon, a partner and real estate law expert at Perley-Robertson, Hill & McDougall LLP about the options available to tenants and landlords amid the pandemic. This is an edited transcript of the discussion. To hear the full interview, please watch the video above.
CURRAN: There is a specific program that was formed to help people deal with their commercial leases and pay their rent. Josh, can you tell us about the CECRA program?
MOON: It’s an emergency commercial rent assistance and has a fairly narrow scope of eligibility. It’s for tenants who pay $50,000 or less in commercial gross rent, who have had a 70 per cent gross reduction in their revenue, and a maximum of $20 million in gross revenue across their profitable profiles. This still leaves a lot of tenants non-eligible but in need of assistance, and leaves the landlords in need of more tools and a broader application.
The landlord has to apply for this program and if parties are eligible, the landlord will pay or forgive 25 per cent of the rent, the tenant will pay 25 per cent and the government will loan the remaining 50 per cent, which will be automatically forgiven by Dec. 31, 2020.
CURRAN: Rent deferral is a really hot topic with a lot of businesses. Tell us more about this.
MOON: I believe there’s a duty from the tenant’s perspective to let their landlord understand what their plan is and how they are going to survive this economic time and how long it will take them to recover.
The standard approach that I’m seeing is that landlords are prepared to talk about rent deferrals – tenants don’t have to pay some or all of their rent for April, May and June and you will repay that deferred rent, divided over several months. That allows the tenant to cover some of its costs and put itself in a position to recover.
CURRAN: The big foundational question many are asking is: Can I break my lease?
MOON: The first question we saw coming from the tenant side was definitely “How do I get out of my lease? I just want out of my lease.” It was a natural reaction, there was a lot of angst and psychological stress happening especially among small businesses.
Generally the answer to that question is “no.” The leases in the commercial leasing sector, for the most part, strongly protect the landlord and 90 per cent of them will not let you break a lease or stop paying rent.