Canada Emergency Rent Subsidy (CERS)

CRA provides full details here

For what periods is a business eligible?

  • Businesses are eligible for the subsidy based upon fixed four week periods. These periods align with the periods used for the Canada Emergency Wage Subsidy (CEWS)
  • CERS begins in period 8 (September 27 – October 24, 2020) and will continue unchanged until July 3, 2021. From July 4 – September 25, 2020 the program will be wound down and the subsidy will be reduced from 65% to 20%

What expenses does the CERS cover?

  • For businesses that lease their property from a landlord that isn’t related to them
    • all leasing costs including base rent
    • common costs
    • property taxes (if paid directly by the tenant)
  • For businesses that own their property
    • insurance on the property
    • property taxes paid with respect to the property
    • Interest on a mortgage secured by the property may also be claimed, there are several limitations that may apply

In either case, the program has a cap on the expenses that qualify of $75,000 per property per period.

In addition to the per property cap, there is also an overall cap calculated based upon the associated group of $300,000 of expenses per period. This limitation does not apply to the lockdown support.

How much of the expenses are covered?

  • The base subsidy is calculated in the same way as the CEWS is calculated. For periods ending before July 4, the base subsidy percentage is calculated as follows:
    • For a % revenue decline in excess of 70%, the percentage is 65% for periods ending before July 3
    • For a % revenue decline between 50% and 70%, the percentage is 40% + 1.25 * % revenue decline
    • For a % revenue decline between 0% and 50%, the percentage is 0.8
  • For periods beginning after July 3, the calculations change and the program is wound down. The program is scheduled to terminate as of September 26, 2021
  • For a business that is subject to a “public health restriction” there is an additional subsidy of 25% available prorated by the number of days the public health restriction applies in the period (government calls this the “lockdown support”).

How is a “public health restriction” defined for the purposes of accessing the lockdown support of an additional 25% subsidy rate?

  • A public health restriction in relation to a property of a business for a period means an order or decision in respect of which the following conditions are satisfied:
    • It is made by Canada or a province (or by a municipality under a power granted by a province)
    • It is made in response to COVID-19
    • It is limited in some way (either geographically, the type of business, or the risks associated with the location)
    • Non-compliance is a federal or provincial offence
    • It is not the result of a failure to comply with a less-intrusive order
    • As a result of the order or decision, some or all of the activities of the business at, or in connection with the property (that it is reasonable to expect the business would, absent the order or decision, otherwise have engaged in) are required to cease (referred to as “restricted activities”) based, for greater certainty, on the type of activity rather than the extent to which an activity may be performed or limits placed on the time during which an activity may be performed
  • Our interpretation of what a public health restriction means, subject to CRA’s interpretation which is likely to follow soon, is as follows:
    • The following public health orders are examples that we do not think will qualify as a public health restriction:
      • It is reasonable to conclude that at least approximately 25% of the qualifying revenues of the eligible entity for the prior reference period that were earned from, or in connection with the qualifying property were derived from the restricted activities
      • The restricted activities are required to cease for a period of at least one week
      • The following public health orders are examples that we do not think will qualify as a public health restriction:
        A restriction on the maximum seating capacity of a restaurant would not qualify because it is a limit to “the extent to which an activity may be performed”
      • A restriction requiring a pub to stop serving liquor by a certain time would not qualify because it is a “limit placed on the time during which an activity may be performed”
    • The following public health orders are examples of orders that are based on the type of activity and could qualify as a public health restriction if all other requirements were satisfied:
      • A restriction requires that restaurants can only serve customers by take-out we believe this is a restriction on the type of activity rather than on the extent or time the activity can be performed
      • A restriction that prevents a nightclub from having its patrons dance in its establishment likely is a restriction on the type of activity. However it may be challenging to show that this restriction (and not other restrictions) result in a 25% decline in revenue.

BBLLP Takeaway

  • The CERS is designed to integrate with the CEWS program and uses many of the same definitions, elections and rules.
  • Most business would be eligible for either CEWS or CERS if they have any revenue decline in any month starting in July. For example a 10% decline in revenue in a single month, could result in an 8% subsidy to both wage and rent expenses for 8 weeks.
  • Because of the wide variety of different elections that can be made in calculating revenues, many business will find that they are eligible for some assistance under either or both the CEWS and CERS.
  • Farming businesses in particular may benefit from CERS as they would generally have very substantial property expenses and their revenue is irregular which in some cases allows for qualification in months with lower receipts.