Canada: The Canada Emergency Rent Subsidy

Effective October 24, 2021, the Canada Emergency Rent Subsidy was replaced by two new programs.

Update:

On December 17, 2021, Bill C-2 received Royal Assent which ended the Canada Emergency Rent Subsidy program and implemented measures to continue to provide rent subsidy support through the Tourism and Hospitality Recovery Program and the Hardest-Hit Business Recovery Program.

The blog post below has been updated to reflect these changes. With different rules and different programs potentially applying to the various benefit periods, MLT Aikins LLP would be pleased to assist you in determining whether you are eligible for these programs and the amount of the subsidy that you may qualify for.

New Rent Subsidy Programs

Effective October 24, 2021, the Canada Emergency Rent Subsidy (CERS) was replaced by two new programs: the Tourism and Hospitality Recovery Program (THRP) and the Hardest-Hit Business Recovery Program (HHBRP). Eligible organizations may continue to apply for CERS claim periods that are still open.

Eligibility

The rent subsidy under the new programs is available to a wide range of organizations, including:

• taxable corporations and trusts;
• individuals;
• registered charities;
• non-profit organizations;
• partnerships, provided that at least 50% of the fair market value (FMV) of all interests in the partnership are held by partners that would otherwise be eligible for the subsidy;
• certain Indigenous government-owned corporations that carry on business;
• registered Canadian amateur athletic associations;
• registered journalism organizations; and
• private schools or private colleges.

The rent subsidy is not available to public institutions, including municipalities, local governments, Crown corporations, public universities and colleges, and hospitals.

There are further eligibility requirements for each new program. As with the CERS, organizations must demonstrate a certain drop in revenue during a specified 28-day period (the "Qualifying Period"). Additional Qualifying Periods have been added so that the programs are available until May 7, 2022.

To qualify for the THRP, an organization must meet one of the following lists of conditions:

1. More than 50% of the organization's revenue comes from one or more tourism, hospitality, arts, entertainment, or recreation activities supported by the program; the organization experienced a 12-month average drop in revenue from March 2020 to February 2021 of at least 40%; and the organization has a revenue drop of at least 40% during the Qualifying Period; or
2. Regardless of sector, the organization was affected by a qualifying public health restriction; and the organization has a revenue drop of at least 40% during the Qualifying Period.

To qualify for the HHBRP, the organization must have experienced a 12-month average drop in revenue from March 2020 to February 2021 of at least 50%, and the organization must have a revenue drop of at least 50% during the Qualifying Period.

For details on how to calculate revenues and revenue drops, visit our blog post regarding wage subsidies.

Eligible Expenses

Qualifying expenses for the purposes of the rent subsidy available under the CERS, THRP and HHBRP include amounts payable under a lease and certain expenses related to the ownership of real property. Expenses paid or payable to non-arm's-length entities are not eligible. For leased property, the rent subsidy can be claimed for base rent, variable rent based on sales or profits, and amounts payable under a net lease including regular expenses such as insurance, utilities, maintenance expenses and property taxes.  For these other regular expenses, the key criteria is that the lease must require the tenant to pay the expenses.

If a business owns real property, the rent subsidy may be claimed for certain expenses as long as the property is not used to earn rental income.  Eligible expenses include interest paid on a mortgage on the property, insurance and property taxes.

Qualifying Periods

The Qualifying Periods that remain open for CERS applications are:

• Period 12:  qualifying expenses paid from August 1, 2021 to August 28, 2021;
• Period 13:  qualifying expenses paid from August 29, 2021 to September 25, 2021; and
• Period 14: qualifying expenses paid from September 26, 2021 to October 23, 2021.

The Qualifying Periods for the THRP and HHBRP have updated numbers and are as follows:

• Period 22:  qualifying expenses paid from October 24, 2021 to November 20, 2021;
• Period 23: qualifying expenses paid from November 21, 2021 to December 18, 2021;
• Period 24: qualifying expenses paid from December 19, 2021 to January 15, 2022;
• Period 25: qualifying expenses paid from January 16, 2022 to February 12, 2022;
• Period 26: qualifying expenses paid from February 13, 2022 to March 12, 2022;
• Period 27: qualifying expenses paid from March 13, 2022 to April 9, 2022; and
• Period 28: qualifying expenses paid from April 10, 2022 to May 7, 2022.

The rent subsidy may be claimed in respect of qualifying expenses that have already been paid by the eligible business or qualifying expenses that have not yet been paid, as long as they are paid within 60 days after the subsidy payment is received (e.g. a business that is relying on the subsidy in order to pay rent may claim the rental expense on its application, even if it only pays its landlord once it receives the subsidy).

Calculating Applicable Subsidy Rates

The rent subsidy rates are tied to the revenue drop experienced by the organization during the applicable Qualifying Period. The following tables outline the subsidy rates available under each program.

THRP Rent Subsidy

HHBRP Rent Subsidy

CERS Rent Subsidy

Under all three programs, businesses that are subject to a public health restriction for at least seven days during a Qualifying Period are eligible for an additional top-up subsidy.  To qualify, the public health restriction must require the business to cease activities which previously accounted for at least 25% of the business's revenues.  If a business qualifies for the top-up, the applicable top-up rate is 25%, pro-rated for the number of days in the Qualifying Period that the public health restriction was in effect.  For example, if a restaurant is required to offer take-out dining only for 21 of 28 days in a Qualifying Period, its top-up subsidy rate would be 18.75% (25% x 21/28 = 18.75%).

Subsidy Limits

The rent subsidies must be claimed on a property-by-property basis.  The maximum amount of eligible expenses for a particular property is $75,000 per Qualifying Period.  If a business is claiming rent subsidies in respect of multiple properties, it may claim eligible expenses of up to $300,000 per Qualifying Period under the CERS and up to $1,000,000 per Qualifying Period under the THRP and the HHBRP.  Where a business is affiliated with other businesses (e.g. two corporations are controlled by the same individual), the limits must be shared between the affiliated businesses.

Next Steps

The rent subsidies will be paid directly to qualifying businesses by the CRA once their application has been received and processed.  Before applying, qualifying businesses are required to register for a new CERS program identifier number via their  CRA My Business Account.

Businesses can calculate their CERS claim using an online calculator on the CRA's website. The CRA will issue payments within three to eight business days after an application is received.  Applicants are encouraged to ensure they are able to receive direct deposits from the CRA to speed up the delivery of payments.  Businesses have 180 days from the end of a Qualifying Period to apply for the rent subsidies.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.