OPEN LETTER to Deputy Prime Minister about concerns on Emergency Commercial Rent Assistance for small businesses

May 1, 2020

Hon. Chrystia Freeland, Chair
Cabinet Commi:ee on the federal response to the coronavirus disease (COVID-19)
House of Commons
Ottawa, ON K1A 0A6

Open Letter: Concerns about Emergency Commercial Rent Assistance for small businesses COVID-19

Dear Deputy Prime Minister Freeland,

I write you today to alert you to concerns with the recently announced Canada Emergency Commercial Rent Assistance (CECRA) program to assist small businesses in paying rent.

The small business community has been hit very hard by the COVID-19 pandemic, and I have been hearing from many small businesses in my riding of Vancouver East who are very worried that they will not have the revenues or cash on hand to meet their commercial rent or lease payments.

Initial details about the program were announced by the Prime Minister on April 24, including that eligible small businesses with commercial rents of no more than $50,000 per month and who have temporarily ceased opera1ons, or who have experienced at least a 70% drop in revenues, could have their commercial rents reduced by up to 75%. It was also announced that this would be delivered via loans to the qualifying commercial property owners to cover 50 per cent of three monthly rent payments that are payable by eligible small business tenants who are experiencing financial hardship during April, May, and June; and, that the loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 per cent for the three corresponding months under a rent forgiveness agreement, which will include a term not to evict the tenant while the agreement is in place.

Even though full details on the program have not been released, I am already hearing from constituents who have been holding out hope that this program may offer much-needed commercial rent relief that the program will not benefit them.

One constituent who co-owns a small commercial gallery wrote to say that he approached his commercial landlord about seeking assistance on their business’ commercial rent through this program. He says that the landlord owns the building outright and does not have a mortgage payment, and therefore will not offer assistance to their commercial tenants.

Another constituent wrote with a similar concern. They own a business providing rental equipment, and say that their landlord “has no mortgage, has no interest in providing relief, doesn’t want paperwork, and for the most part thinks businesses should provide for tough times themselves”. They voiced their concern that, in providing the program through landlords rather than directly to tenants, there are many businesses like theirs who will not be able to access this rent relief.

A third constituent who wrote, a health practioner who sub-lets a room in a clinic from the main tenant with another health practioner, advises that both of their practices are suspended while pandemic control measures are in place. She said that the clinic leaseholder has approached the building owners about accessing commercial rent assistance; however, the owners have advised that because they own the building outright and have no mortgage on the building they don’t believe that they are eligible to work with them to provide commercial rental assistance through this program. The constituent adds that the building owners are not a large commercial property manager, rather are a small family opera1on where the building owners live on the low-rise top floor and live from the rents collected from the ground and middle floor units, and she voices her concern that the program details offer little to small commercial landlords or their tenants.

All three constituents own businesses in sectors that have been slowed or shut down by the social distancing and other health measures required to control virus transmission in the pandemic, and none offer a service that is considered essential in this pandemic situa1on. Therefore, their ability to access emergency assistance such as the CERCA will do much to determine whether these businesses will be able to survive the pandemic.

It is therefore greatly concerning to me that access to this commercial rent assistance for the commercial tenants in need of it can apparently be denied simply by the property owner not agreeing to par1cipate. In these cases I bring forth to your a:en1on, it seems clear that the property owners have determined that, since they no longer have an outstanding mortgage, there is little incentive for them to go through the process of applying for the program.

To ensure that the small business get the assistance they need to survive the pandemic, the above concerns must be addressed. Commercial rental assistance for small business owners need to be offered direct assistance rather than having to go through their landlords or property owner. I am therefore writing to urge that CECRA be adjusted so that the small business owners themselves would be able to make a direct application for the CECRA and that support is offered to the small business owner regardless whether or not their landlord has a mortgage.

Aside from this critical point, it has been brought to my attention that sole proprietors who operate their business from a live-work building are now worried that they cannot qualify for CECRA. It is not uncommon that many entrepreneurs and small business professionals have this type of set up where their workspace is combined with their living quarters. In fact in Vancouver we have a number of buildings that are designated artist live work studios. The City of Vancouver explicit created these spaces to support the creative industry in recognition of the fact that there is a shortage of artist studios in the city, that the income for those in the creative industry is unstable, and the high cost of housing

in Vancouver. These designed buildings is zoned with a live-work designation. The tenants in these building are individual unique small businesses in the creative industry, who have signed off a 75% work space business clause in their lease. This means 25% of the space in the studio apartment are living quarters.

I have a cons-tuent who is a photographer and his studio space in the building has been locked down by his landlord, to anyone from outside of the building. This severely reduces the capacity of his business operations currently. Luckily for him, his landlord is willing to work with him in gettng access to CECRA, however, they do not believe they would be eligible for this program.

I am very concerned that these artist live work spaces may not be recognized as a place of business and be rendered as ineligible for CECRA. If they do not receive CECRA, they will lose both their business and their home.

I therefore urge you to make this crucial commercial rent relief available for those operating their businesses in work-live buildings, and to provide this reassurance as soon as possible. Another rent day has just passed, and many fear they cannot make it to next month without the support they desperately need.

Support for small businesses will be critical for our community’s economic recovery post-pandemic, and an urgent response is needed. I thank you in advance for your urgent attention to this matter and will look forward to your prompt response.

Sincerely,

Jenny Kwan

Cc:
The Hon. Jean-Yves Duclos (Vice-Chair) The Hon. Navdeep Singh Bains
The Hon. William Sterling Blair
The Hon. Patricia Hajdu
The Hon. Mélanie Joly
The Hon. William Francis Morneau The Hon. Carla Qualtrough
The Hon. Kirsty Duncan
The Hon. Mary Ng