TENANTS PAYING THE PRICE: LOW PARTICIPATION IN RENT AID.

Tenants pay the consequences

• Both big and small landlords are divided over whether to participate in the federal government’s commercial rent assistance program, partly because of how complicated the application process is, as well as a reluctance to reduce rent by 25 per cent as the program mandates even though several provinces, including Ontario on Monday, have made it illegal to evict tenants.

“I can tell you that right now we have 200 landlords who are eligible to participate, and only 16 per cent have signed on to the program,” said Frank Hennessey, chief executive of Recipe Unlimited Corp., which owns several restaurant chains and is one of the country’s largest food distributors.

Hennessey said landlords are telling him that they have either not had the time to go through the entire application process for the Canadian Emergency Commercial Assistance Program ( CECRA), given that Ottawa only began receiving applications on May 25, or that they do not want to give up 25 per cent in rent.

CECRA, which is administered through Canada Mortgage and Housing Corp., provides unsecured, forgivable loans to eligible commercial property owners to cover the equivalent of 50 per cent of a tenant’s rent, with the tenant paying another 25 per cent. Landlords then have to forgive the rest of the rent owed.

“The program as it is currently constructed is not really a hardship for landlords,” Hennessey said. “The ones who have been most cooperative and willing to help are the mom- and- pop landlords. What has been disappointing is the larger landlords have been reluctant to budge.”

The Financial Post contacted numerous large landlords to ask about the CECRA program, and a few said they were in the process of submitting applications, but most did not respond.

Jonathan Gitlin, president and chief operating officer of Riocan Real Estate Investment Trust, said the company would participate in CECRA once the final legal documents are available in the program’s portal.

“We will actively work with qualifying tenants to apply for the program,” he said.

Jordan Robbins, chief operating officer of First Capital Realty Inc., which owns some of the largest office towers in downtown Toronto, said his company’s participation in CECRA was an obligation.

“We big landlords need to take some of the responsibility and financial burden away from tenants,” he said, adding that the low participation rate for CECRA was surprising.

“The application is fairly detailed and involves getting each tenant to fill out their own application before we can apply, so it will take weeks to complete,” Robbins said. “It could be that landlords intend to participate, but just have not submitted their applications.”

In the meantime, the situation for businesses remains bleak. A survey conducted at the end of May by the Canadian Federation of Independent Businesses showed that half of business owners would not be able to pay rent in June, and 20 per cent feared eviction if they continued to not pay rent.

A recent report by Colliers Canada that surveyed 7,100 commercial tenants in May found that 16 per cent did not pay rent in May, while 42 per cent paid in full and 19 per cent provided partial payments. Yet another survey by the Broadview Danforth BIA in Toronto found that three- quarters of small businesses in the Toronto area, Guelph, Ont. and Ottawa were not able to pay their full rents in June.

Mario Zelaya, founder and chief executive of Bad Axe Throwing Inc., a chain of entertainment facilities across North America ( and one in the United Kingdom), was once hopeful that his longtime Toronto landlord would apply for CECRA. He ended up getting evicted instead.

Emails seen by the Post showed Zelaya was asked by his landlord for documents to complete the CECRA application when the portal opened.

“I will apply tomorrow morning,” the landlord said in an email on May 24.

Less than 24 hours later, the landlord proposed terminating the lease at Bad Axe’s location in downtown Toronto, even though he appeared to be going forward with the CECRA application.

“We are applying (for) the relief from the government for the business tenants. First of all, we are not sure we can get it. Second, we don’t know how long it will take. Third, even if we get it, it only covers ( sic) three months,” the landlord wrote. “Under this estimation, it would be very stressful to figure out when we can get the rent from you.”

Zelaya said he was shocked and confused when he received the email, and attempted, in vain, to persuade the landlord to reverse the decision. “It was totally out of left field. I was getting the forms ready to give to him,” Zelaya said in an interview with the Post at the end of May.

Days later, he was served an eviction notice and locked out of his store. The landlord did not respond to repeated requests to speak about the eviction.

Last week, governments in British Columbia, Saskatchewan and Alberta banned commercial evictions in light of increasing reports of tenants being evicted. Ontario followed suit on Monday, with Premier Doug Ford ordering legislation to ban the eviction of commercial tenants from June 3 to Aug. 31.

“I’m here for the little guy. Small business owners are the backbone of our community,” Ford said in a press conference Monday.

But for Zelaya, it’s too little too late.

“I have lost at least $ 10,000 in equipment and merchandise that was in the property because I was locked out by the landlord,” Zelaya said. “On top of not having an income for months, I have lost assets, too.”

Laura Jones, chief strategic officer of Canadian Federation Of Independent Business, is concerned that the biggest deterrent for landlords is how tedious the CECRA application is.

“One landlord we heard from had been on hold for four hours with CMHC,” she said. “They are being asked to ask tenants for detailed financial information like projecting June’s revenues. That’s really difficult to do given that we’re in a state flux here with the economy reopening. I’m just going to use plain language and say providing rent relief this way is dumb.”

Recipe Unlimited’s Hennessey is calling for Ottawa to impose a one- year moratorium on evicting restaurants and small business retailers, and allow tenants to walk away from their leases without penalty if they do not receive abatement support.

“The voluntary nature of the ( CECRA) program is its greatest weakness,” he said.

But First Capital’s Robbins cautions against judging the program too soon. He said it will take time for landlords to submit applications, and for the CMHC to process them.

“The process has to be extensive,” he said. “The government has put vigilance and vigour into ensuring that money is going into the right hands.”

Meanwhile, Zelaya is in the process of filing a lawsuit against his landlord, a process he said will cost additional time and money.

“The last three months have just been a complete nightmare, and I have tried to stay positive, but, at this point, I just need more help,” he said.