The Canada Emergency Rent Subsidy
Updated as of March 16, 2021.
The federal government has introduced the Canada Emergency Rent Subsidy (“CERS”) which has replaced the Canada Emergency Commercial Rent Assistance. CERS will be available retroactively to September 27, 2020 until June 2021, and the current parameters will apply until June 5, 2021.
CERS takes landlords out the equation by delivering aid directly to applicants. The subsidy is available on a sliding scale – the amount of the subsidy that eligible organizations receive will be proportional to the amount of their revenue losses. The maximum base rate subsidy is 65% for organizations with a revenue drop of 70% or more. The base rate then declines to a rate of 40% for organizations with a revenue drop 50%, and gradually reduces to 0% for organizations that have not experienced a decline in revenues. The federal government’s CERS website provides a calculator that applicants can use to calculate the amount they can apply for.[1]
Eligible expenses include commercial rent, property taxes, property insurance, and interest on commercial mortgages for a qualifying property, less any subleasing revenues.[2] Further, only expenses paid under rental agreements in writing that were entered into before October 9, 2020 (and continuations of those agreements) and are related to real property located in Canada are eligible. If the applicant has not paid the amounts due for the eligible expenses yet, they must attest that these amounts will be paid within 60 days of receiving the rent subsidy payment.
Non-eligible expenses include any expenses that were paid or payable to non-arm’s length entities[3] or for a timeframe that falls outside of the claim period. Qualifying properties include any buildings or land in Canada that the applicant’s business or organization owns or rents and uses during the course of ordinary activities. Properties that do not qualify include: residential properties, properties used to earn rental income from arm’s-length parties or any properties that are primarily used to earn rental income directly or indirectly from a non-arm’s length party, that are primarily used by that party to earn rental income.[4]
Expenses for each qualifying period will be capped at $75,000 per location and be subject to an overall cap of $300,000 that would be shared among affiliated entities.
Eligible entities include individuals, taxable corporations, trusts, and non-profit organizations and registered charities. In order to be eligible, organizations must meet one of the following criteria:
- Have a payroll account as of March 15, 2020 or have been using a payroll service provider;
- Have a business number as of September 27, 2020 (and satisfy the Canada Revenue Agency that it is a bona fide rent subsidy claim); or
- Meet other conditions that may be prescribed in the future.
For the purposes of calculating the CEWS, an entity’s revenue is its revenue from its ordinary activities (in Canada) earned from arm’s-length sources, determined using its normal accounting practices. Revenues from extraordinary items and amounts on account of capital are not counted. Special rules will be provided in order to take into account certain non-arm’s-length transactions – for example, where an entity sells all of its output to a related company that in turn earns arm’s length revenue.
| Qualifying Period | General Approach | Alternative Approach | |
| Period 1 (the first period for which the rent subsidy will be in effect) | September 27 to October 24, 2020 | October 2020 over October 2019 or September 2020 over September 2019 | October 2020 or September 2020 over average of January and February 2020 |
| Period 2 | October 25 to November 21, 2020 | November 2020 over November 2019 or October 2020 over October 2019 | November 2020 or October 2020 over average of January and February 2020 |
| Period 3 | November 22 to December 19, 2020 | December 2020 over December 2019 or November 2020 over November 2019 | December 2020 or November 2020 over average of January and February 2020 |
| Period 4 | December 20, 2020 to January 16, 2021 | December 2020 over December 2019 or January 2020 over January 2021 | December 2020 or January 2021 over average of January and February 2020 |
| Period 5 | January 17 to February 13, 2021 | January 2020 over January 2021 or February 2020 over February 2021 | January 2021 or February 2021 over average of January and February 2020 |
Applicants can apply for the rent subsidy retroactively for any period up to 180 days after that period has ended.
Lockdown Support
The new Lockdown Support will provide a 25% top-up as additional support to businesses with locations that are temporarily forced to close or have their business activities significantly restricted by a public health order issued by a federal, provincial, or municipal government, or a local health authority. This includes situations where the organizations has had to shutdown as a result of an outbreak of COVID-19.
In order to qualify for the Lockdown Support, a business must:
- have a base rent subsidy rate of more than 0% for the claim period;
- qualify for the base CERS; and
- be required to completely shut the location down; or cease some or all of the activities at the location and it must be reasonable to conclude that the ceased activities were responsible for at least 25% of the revenues of your business at that location.
In order to apply, a public health order must be limited based on one of these factors: geographical boundaries, type of business or other activity or risk associated with a particular location. It must also result in sanctions or be an offence if the business not does comply.[6]
All applications must be made on or before 180 days after the end of the qualifying period. [7] Applicants can apply for CERS as of November 23, 2020.
At Sotos LLP, our team of experts has been advising businesses in the automotive, restaurant, grocery, personal, home and professional services, hotel, retail and cannabis sectors as they face challenging economic and financial issues relating to the current pandemic. Please contact us if you wish to discuss your eligibility for any of the government assistance programs, and to determine an effective approach to combatting business challenges caused by the outbreak of COVID-19.
Anna Thompson-Amadei, Sotos LLP
Anna is an associate with Sotos LLP in Toronto, Canada’s largest franchise law firm. She practices business law with a focus on franchising, licensing, and distribution. Please contact Anna at 416.572.7322 or athompson-amadei@sotosllp.com if you would like to discuss this or any other topic relating to the operation of your business.
[1] https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy/cers-calculate-subsidy-amount.html#h-3
[2] Note that any sales tax component of these costs would not be an eligible expense.
[3] Note that on February 24, 2021, the government announced a proposed change to amend the rules in the Income Tax Act so that Lockdown Support would be available in situations where the activities of a party not dealing at arm’s length are required to cease as a result of a “public health restriction”, that party rents the property from the entity, and all other conditions for the Lockdown Support are met.
[4] https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy/cers-expenses-claim.html
[5] https://www.canada.ca/en/department-finance/news/2020/11/canada-emergency-rent-subsidy.html
[6] https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy/cers-calculate-subsidy-amount.html
[7] https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy/cers-how-apply.html