Canada Emergency Rent Subsidy (CERS)

Last updated November 30, 2020

This article is intended to provide a high-level overview of the Canada Emergency Rent Subsidy (CERS). Please speak to your Stern Cohen advisor to discuss the CERS in more detail.

What is it?

The CERS is intended to provide direct support to tenants and qualifying property owners whose revenue has decreased. The CERS program will run from September 27, 2020 until June 2021. The CERS may provide a total subsidy of up to 90% of eligible expenses (up to certain maximums) for those hardest impacted. The Government has suggested they will consider making changes to the CERS (i.e., to the percentage of expenses received as a subsidy) after March 13, 2021.

Who is eligible?

In simplified terms, an eligible entity with a CRA business number on September 27, 2020 that has experienced a drop in revenue and has eligible expenses (e.g. rent) to claim. An eligible entity includes individuals, corporations, NPOs, charities, and certain qualifying partnerships. Some exceptions apply.

How much will you get?

The claim is determined by three elements:

1. The percentage decline in revenue;
2. Whether the business was temporarily forced to close due to a COVID-19 public health order; and
3. The amount of eligible expenses.

Base subsidy

The percentage decline in revenue will determine the base CERS rate that will be applied against eligible expenses. See the chart below provided by the Government of Canada on how the base CERS rate is determined.

Top-up subsidy (AKA the lockdown subsidy)

A top-up subsidy equal to 25% of eligible expenses is available for those who have needed to shut-down for at least one week due to a COVID-19 public health order. The top-up subsidy is prorated to the length of the shutdown.

How is the revenue decline determined?

The revenue decline is determined in a manner similar to the Canada Emergency Wage Subsidy (CEWS). Speak to your Stern Cohen advisor for more details.

What are eligible expenses?

A) If you rent a qualifying property:

1. Rent (including rent based on a percentage of sales, profit, or similar criteria);
2. Amounts required to be paid or payable by you under a net lease. These might include:

a. base rent
b. regular payments for customary operating expenses, such as:
property insurance, utilities, and common area maintenance
c. property and similar taxes, including school and municipal taxes
d. regular payments to the lessor for customary ancillary services

B) If you own a qualifying property:

1. Property tax
2. Property insurance
3. Interest on commercial mortgages for the purpose of purchasing real property

Maximum expenses per claim period

For each 4-week claim period, there is a maximum of $75,000 eligible expenses per business location that can be claimed and a maximum of $300,000 considering all locations claimed by affiliated entities.

Excluded expenses – Amounts paid to non-arm’s length parties

Amounts paid to non-arm’s length parties (e.g. a related company or family members) are not considered an eligible expense.

What is a qualifying property?

A qualifying property is land or a building in Canada that your business or organization:

1. Owns or rents; and
2. Uses in the course of your ordinary activities.

A qualifying property does not include:

1. Your home, cottage, or other residence used by you, your family members, or other non-arm’s length persons (e.g. related persons);
2. Properties you own that are primarily used to earn rental income from arm’s-length parties, or where the property is used to earn rental income directly or indirectly from a non arm’s-length party, that is not used by that party to primarily earn rental income.

More information and how to apply

You can read more about who can apply and how to apply by visiting this link: https://www.canada.ca/en/revenue-agency/services/subsidy/emergency-rent-subsidy/cers-who-apply.html

CERS backgrounder: https://www.canada.ca/en/department-finance/news/2020/11/canada-emergency-rent-subsidy.html

Disclaimer: While the information in this article is meant to be helpful, it is not meant to be advice for your unique situation.  If you would like to become a client, please contact us today.