Advocacy | Coronavirus | Finance & Taxation | National | Store Operations

New Canada Emergency Rent Subsidy (CERS)

November 10, 2020

View RCC’s CERS Overview for current information on this program.

The new Canada Emergency Rent Subsidy (CERS) provides financial assistance for eligible fixed property expenses, including rent and interest on commercial mortgages until June 2021, CERS replaces the previous Canada Emergency Rent Assistance (CECRA) program that expired on September 26, 2020. 

The CERS details below are applicable until December 19, 2020 and retroactive to September 27, 2020.  Details for the CERS program between December 20, 2020 and June 2021 will presumably be forthcoming toward the end of this year.

As noted in previous RCC bulletins, the new CERS program is much more like the Canada Emergency Wage Subsidy (CEWS) in its approach than it is like CECRA, insofar as CERS is paid directly to the retailer and is proportional to revenue reduction.

Subsidy Rates

The maximum “base rate” subsidy of 65% is reached at revenue reduction of 70% or more and is proportionately reduced to 40% assistance at 50% revenue reduction. Hence, each percentage point of revenue reduction between 50% and 70%, generates 1.25% assistance on eligible rental expenses.  The rate of assistance drops to 0.8% on each point of revenue reduction between 0% and 50%.

Revenue Reduction Applicable CERS assistance rate Maximum Assistance Rate
0% to 50% 0.80% 40%
50% to 70% 1.25% 65%

See Canada Emergency Rent Subsidy backgrounder for a more detailed table.

Eligible Expenses

Expenses eligible for the CERS subsidy include commercial rent, property taxes (including school taxes and municipal taxes), property insurance, and interest on commercial mortgages. The sales tax component on these expenses (most typically on the insurance portion) are not eligible expenses.  This would be true for lease agreements entered into Before October 9, 2020 (and such lease agreements that are continued thereafter).

Eligible expenses for any given location are $75,000 per qualifying period with maximum eligible expenses of $300,000 for affiliated entities per qualifying period.  In taking this approach, the government has eliminated the $20 million enterprise size cap that existed under CECRA.  It had also eliminated the $50,000 gross rent cap per location that existed under CECRA.  Hence, any size of company will qualify for some assistance (presuming revenue reduction) and larger/more expensive locations are not excluded as was the case for CECRA. These changes help address two of the retail industry’s primary issues with the previous CECRA program.

Reference Periods

Reference periods are the same as those for CEWS, with which most RCC members will already be familiar.  The applicable rate of assistance will be determined by the change in an eligible entity’s monthly revenues, year-over-year, for the applicable calendar month, so for example, November 2020 compared to November 2019.  Alternatively, an entity can choose to calculate its revenue decline by comparing its current reference month revenues with the average of its January and February 2020 revenues.

Once you have chosen between these two options, you must use that method consistently for the three periods covered by these rules, i.e., until December 19, 2020 and do so both for CERS and CEWS (if you are also claiming CEWS).

As with CEWS, you have the option in any qualifying period to use either the current month’s revenues or the previous month’s revenues as the basis for the CERS application.  In essence this is a “better of” outcome for retailers and ensures at least two consecutive months of assistance at the same level.

Period 8 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 9 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 10 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

Applications

One of the biggest departures from the former CECRA rent assistance program that wrapped-up in September is that tenants will be able to apply directly for support through the Canada Revenue Agency, instead of having to rely upon their landlord(s) to apply for the program through Canada Mortgage and Housing Corporation (CMHC).

Applications must be made no later than 180 days after the end of each relevant qualifying period.

Top-Up Subsidy

A top-up CERS subsidy of 25% will be available for retailers who are temporarily shut down or “significantly limited” by a mandatory public health order.  The trigger for this subsidy will be a public health order issued by a federal, provincial or territorial government, or by a municipality or regional health authority.

The top-up subsidy, referred to also as Lockdown Support, will be retroactive to September 27, 2020 and eligibility will continue until June 2021.  The rules below are in place until December 19, 2020. Details for the top-up subsidy between December 20, 2020 and June 2021 will presumably be forthcoming toward the end of this year.

The public health order must stipulate the cessation of some type or types of activity at the location (you cannot self-select in this regard) and the cessation must last for at least one week.  Moreover, if a complete shutdown is not ordered, it must be a cessation that reduces revenues at that location by at least 25% relative to the relevant pre-pandemic period.

Hence, a retail store that is ordered to close down its location in a mall, but that continues to provide online sales and curbside pick-up, could qualify so long as its in-store sales normally accounted for at least approximately 25 per cent of its revenues.

Reductions in hours of operation or imposition of physical distancing rules would not qualify for the top-up.

Locations that are ineligible for the CERS base subsidy (because they have seen no revenue reduction) will not qualify.  Just to be clear, you are not required to be eligible for the maximum base subsidy, just some portion of the base subsidy, in order to qualify for the top-up.

Note: The 25% top-up subsidy means the amount of eligible expenses that will be paid, not 25% of the base subsidy. So, for example, a retailer that has seen a revenue reduction of 40% and had also been subject to a public health order that has “significantly limited” its operations for a month.

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