A new federal program providing rent relief for smaller business tenants will help, but it may leave some struggling merchants behind, say observers.
The initiative will provide forgivable loans to commercial property owners to cover 50 per cent of the rent payable by tenants experiencing financial hardship during April, May and June.
The loans will be forgiven if the mortgaged property owner agrees to reduce the small business tenants’ rent by at least 75 per cent for the three corresponding months under a rent forgiveness agreement, which will include a pledge not to evict the tenant while the arrangement is in place.
The small business tenant would cover the remainder, up to 25 per cent, of the rent.
Jordan Krulicki, a realtor with Red Deer’s Century 21 Advantage Commercial, has been watching developments on the Canada Emergency Commercial Rent Assistance program closely since it was first floated by Prime Minister Justin Trudeau last week.
“I think it does help certainly,” said Krulicki on Friday.
However, he questions some of the eligibility requirements, especially a condition that small businesses must have experienced at least a 70-per-cent drop in pre-COVID-19 revenues.
“I think that’s way too high,” he said of the program, which is available to businesses that pay less then $50,000 in monthly rent.
Krulicki also questions the time line for the three-month program, which runs to the end of June.
“From what we’ve been hearing from our landlords, and our tenants, even, is they haven’t had too many calls for help quite yet,” he said.
“We anticipate in May, June and July that may be different. But for April, I would say 99 per cent of their rents were paid on time.
“I think the ripple effects after all this in July and August, as it goes on, I think we’ll see more impact then than right now.
“It would be awesome if they extend it a little bit.”
Other requirements, such as the condition that landlords must slash rents by 75 per cent, then apply to the program and await compensation, may deter some from taking advantage.
“I think it’s really landlord dependent,” he said. “I don’t really like that so much.”
He doubts, though, that requirement would be a deal breaker for most landlords.
The Canadian Federation of Independent Business applauded many elements of the new program, but shared many of Krulicki’s reservations.
The federation is concerned the program may be overly complicated and too reliant on landlords to administer, the group’s executive vice-president, Laura Jones, said in a statement.
Landlords might not bother with the program if it means absorbing some losses, even if their tenants badly need the help, the federation said.
In addition, the threshold of 70 per cent in lost revenue might disqualify hard-hit businesses from getting help.
“This is welcome news, but many business owners with dramatic revenue losses will not qualify for the program,” Jones said.
— With files from The Canadian Press