Rent-relief program confusing and too risky for landlords, broker says

The "wildly confusing" federal commercial rent relief program may not get much uptake because the effort to help tenants puts too much risk onto the landlords, says an Edmonton commercial real estate broker.

"I've heard a lot of people say that they're interested in it, they want to take advantage of a program, especially if it's helping a tenant who is struggling," said Chad Griffiths, an Edmonton broker for NAI Commercial, a Canadian real estate service firm.

"But in its current form right now, there's not going to be a rush of people to apply."

Starting Monday, landlords can begin applying for the Canada emergency commercial rent assistance (CECRA) program, which aims to reduce the rent owed by small business tenants by 75 per cent for April, May and June.

It's complicated

The rent-relief plan is complicated, Griffiths told CBC Radio's Edmonton AM on Monday.

It requires property owners to cut the rent by 25 per cent for those three months and for tenants to pay 25 per cent of the rent for the period. Property owners can then apply for a loan to cover the remaining 50 per cent.

If eligibility requirements are met, the loan would not have to be repaid, he said.

And that's the sticking point, Griffiths said.

"What happens if those eligibility requirements aren't met and the landlord essentially doesn't have that loan forgiven by the government?" he said.

"Now the landlord has agreed to reduce their rent by 25 per cent and take on a loan on the tenant's behalf with it being somewhat vague on how actually that gets paid back."

To qualify, small business tenants must pay less than $50,000 a month in rent. As well, they must have experienced a revenue decline of at least 70 per cent from pre-COVID-19 levels, or they must have been forced to close down because of pandemic restrictions. Non-profit and charitable organizations are also eligible.

About a quarter of businesses who participated in an Edmonton Chamber of Commerce survey at the end of April said they don't have enough cash on hand to make their next rent or mortgage payment. Fifty-three per cent expected they would go out of business as a result of COVID-19.

The survey was conducted April 20-26, three weeks before Alberta started allowing businesses to begin the process of careful reopenings.

In an effort to get a sense of what is happening with Alberta's businesses, the provincial government on Monday launched its own survey,which has a strong focus on commercial landlord and tenant issues.

The survey, which offers a different set of questions for tenants and landlords, asks about challenges of such issues as developing payment schedules, paying commercial rent and meeting other financial obligations during the COVID-19 pandemic.

'Can't just guilt people'

Griffiths is also concerned about property owners being painted as villains, referring to Ontario Premier Doug Ford's mid-May comments urging "vicious" landlords to have a heart.

"I think that there needs to be a message going back to the government that we can't just guilt people," Griffiths said.

The program is being administered by the Canada Mortgage and Housing Corporation and cost-shared by the provinces.

Griffiths acknowledged that the speed with which the program came together could explain some of the complexity.

"It's wildly confusing when you look at it the government is organizing this plan, CMHC is actually going to be administering it, landlords have to apply on behalf of the tenants, and then part of that is a loan that gets forgiven to the banks," he said.

The easiest way to solve the problem would be to put the money directly in the hands of the tenants, he said.

"I think the general sentiment is that people are happy there is a program, that property owners and small businesses weren't just glossed over during this whole process.

"But the fact that it's putting a lot of the risk on the landlord when it's designed to help the tenant, just seems at odds with what a lot of people would hope that a program like this would do."