On April 7, 2021, the Province of Ontario enacted a new provincial emergency and stay-at-home order effective at 12:01 am on April 8, 2021. The Government made this enactment less than a week after Premier Doug Ford implemented a new province-wide COVID-19 shutdown beginning on April 3, 2021. These new shutdown measures directly respond to the sharp rise in COVID-19 infection rates and hospitalizations since the last government-mandated shutdown ended in Toronto, Peel, and North Bay Parry Sound District public health regions on March 8, 2021.
The new shutdown is expected to continue for at least four weeks and calls for various broadranging restrictions on business activities in the Province of Ontario. During this new shutdown, the COVID-19 Response Framework (colour-coded zones) will be paused.
We note the following non-exhaustive list of some of the more notable restrictions to be imposed during the new shutdown, which will inevitably impact both commercial landlords and tenants, namely:
- In-person dining will be prohibited, both inside and outdoors. However, businesses can still provide take-out, delivery, and drive-through service.
- The majority of non-essential retailers will be limited to only operate for curbside pick-up and delivery, via appointment, between the hours of 7 am and 8 pm.
- Restricting access to shopping malls to limited specified purposes, including access for curbside pick-up and delivery, via appointment.
- Restricting discount and big box stores in-person retail sales to grocery items, pet care supplies, household cleaning supplies, pharmaceutical items, health care items, and personal care items only.
- Prohibiting the provision of personal care services.
- Prohibiting the use of facilities for indoor or outdoor sports and recreational fitness (e.g., gyms) with very limited exceptions.
That being said, certain types of stores can operate for in-person retail by appointment only and subject to a 25% capacity limit and restricting allowable hours of operation to between 7 am and 8 pm. Please see the following news release for fuller details on what types of businesses will be allowed to open for in-person retail: https://news.ontario.ca/en/release/61029/ontario-enactsprovincial-emergency-and-stay-at-home-order.
Continuing Relevance of the Canada Emergency Rent Subsidy ("CERS")
This third province-wide shutdown means that the CERS program remains critical to the survival of businesses forced to either close entirely or cease engaging in important components of their business operations.
As we have discussed in past bulletins, the CERS program offers a base subsidy to eligible commercial tenants that have suffered a revenue drop due to COVID-19. For tenants, the base subsidy is equal to a percentage of the rent that is paid or payable by the tenant to its landlord for any location in respect of any CERS claim period. The base subsidy's maximum rate is currently 65%; however, this rate is only available to eligible entities with a revenue drop of 70% or more. For tenants with a revenue drop of less than 70%, the base rate gradually declines as their revenue drop declines, based on a prescribed formula. That being said, as we discuss in more detail below, the amount of rent or eligible expenses that can be subsidized is subject to certain caps prescribed under the program.
Additionally, CERS offers a second type of subsidy to those eligible entities with locations that are forced to close or have their business activities significantly restricted by a "public health restriction" within the meaning of the program. This subsidy is called the "Lockdown Support". Due to the new shutdown, the Lockdown Support will be critical in Ontario during the coming months. If you may be eligible for CERS, it is important to be aware of the nature of the Lockdown Support, how it is calculated, and whether or not you are eligible to receive this additional subsidy.
What is the Lockdown Support?
For tenants, the Lockdown Support is a subsidy equal to up to 25% of the tenant's "qualifying rent expense" for any location in respect of any CERS claim period. A "qualifying rent expense" for any location means the regularly recurring rent (excluding sales taxes and other prescribed exceptions) that is paid or payable by the tenant to a non-related landlord after deducting any sublease rent received or receivable by the tenant from non-related parties in respect of that location. For clarity, if the tenant is entitled to receive sublease rent from an arm's length subtenant at the subject location, this would reduce the amount of rent that can be subsidized.
Additionally, the Lockdown Support is available to those CERS-eligible property owners with related tenants if the tenant uses the subject property in the course of its regular activities.
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