The federal government’s rent assistance for commercial tenants is falling flat.
Why?
Because some landlords are choosing to not take advantage of the offer, including those in Burnaby. The NOW has been contacted by four different business owners who say their landlords are refusing to apply for the funding, which has these owners on the verge of collapse as they struggle to reopen. They are, however, afraid to go public with their situations for fear of reprisals from landlords.
The good news is that small businesses in B.C. that have suffered significant revenue losses during the COVID-19 pandemic will be protected from eviction effective June 1.
The provincial government announced last week new measures to protect small businesses that are eligible for federal commercial rent assistance, but are unable to access that assistance because their landlords won't apply to the program.
"There are certainly some tenants who their landlords have been very clear that they don’t want to bother, they don’t want to take the time to apply for the federal program, and that then hurts the tenant, because the tenant doesn’t have the opportunity to be able to have that relief to help them," said B.C. Finance Minister Carole James. “I expect that it will, I hope, make a difference in encouraging those landlords to apply now that they won’t be able to evict those tenants.”
Some retailers are actually calling out their landlords for denying them access to an emergency government program that helps businesses cover rent.
Helmi Georgey, who operates the Waves Coffee House in a plaza in Port Coquitlam with his wife and son, was forced to lay off four workers after he shut his doors March 18.
Looking back at his books, his revenue plummeted by over 90% in April and to roughly 70% in May. With a monthly lease of $9,500 — his biggest cost — there was no way he could cover his expenses.
So, like a dozen of the small businesses in the plaza, he worked out a deal with the landlord to defer half of April and May’s lease payments. Those deferrals totalled $120,000, a cost borne entirely by the landlord after the lender declined to provide any assistance, according to Chris Andison, CEO of the property management company Value Property Group, which oversees the plaza and neighbouring Westwood Mall.
But while in an email to Glacier Media the landlord said it was forced to pass on the costs to tenants so it could meet its lending obligations, for Georgey, that means paying an extra $1,700-plus a month on his lease from July to December — an added cost at a desperate time.
Then came the announcement of Ottawa’s Canada Emergency Commercial Rent Assistance (CECRA) program, and hope swelled among small business owners that they’d have enough relief to stay afloat.
Under Ottawa’s Canada Emergency Commercial Rent Assistance (CECRA) program, the federal government is offering to cover 50% of commercial leases for businesses which have suffered at least a 70% decline in revenue. Businesses and their landlords split the remainder, each covering 25% so that the landlord is guaranteed to receive 75% of their lease.
But enrolment must be initiated by the landlord, and for small business owners like Georgey, their landlord’s refusal to participate could cost them their business as they struggle to come out from under the financial fallout of the COVID-19 pandemic.
CASH FLOW
The business Foot Solutions operates as a specialty orthopaedics retailer, according to owner-operator Voytek Krawus.
Krawus laid off one worker and moved all his sales online for about 10 weeks during the height of the closure. Still, revenue plummeted by well over 70% compared to last year, he said.
“Whatever I make in a month, I have to pay all the expenses,” said Krawus. “Not having anything from the three months, I cannot pay suddenly the full amount of the lease, plus the first part of the deferral… It’s not possible.”
Krawus said he’s been trying to work out a solution with the landlord, from another deferral to the government rent program, both of which he said were denied by the property managers.
Value Property Group would not disclose the identity of the landlord they represent. But in correspondence sent from the company’s senior legal council, the landlord lays out why they won’t apply for the commercial rent subsidy, citing at least 16 reasons the program is both “onerous and unreasonable” and that it transfers “all the risk and expense from the government to landlords.”
The latest correspondence Krawus received from the property managers was a message saying he was in default of the lease agreement.
If it weren’t for a provincial order last week that prevents landlords from evicting tenants until the end of June — a window meant to give all parties a chance to enrol in the federal rent program — Krawus said he’d be evicted.
Still, Krawus, like many of the business owners in the plaza, fault the federal government for putting the power into the hands of landlords.
It’s the one point where the landlord and the tenants appear to agree.
All the risk falls on the landlord should tenants default on their obligations, wrote Value Property’s Andison, describing the CECRA program as “a myriad of unnecessary layers, putting the landlord between the government and the tenant who needs relief.”
Andison said the landlord has advocated for a rent relief program that closely models the province’s residential rent relief program, in which the tenant can make a direct application.
But with the clock ticking on the CECRA program (applications must be submitted by the end of August), small business owners like Krawus say they’re left with few options beyond taking out more loans and going further into debt.
“Any business in this scenario over the last three months — if you guaranteed 75% of the income, they would take it with their eyes closed,” said Krawus.
“They want us all evicted? The whole plaza? Give me 75% monthly and I’ll take it. Why not them?”
— with files from Haley Woodin, Business in Vancouver and Chris Campbell, Burnaby NOW
