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CERS: Canada’s Proposed Commercial Rent Subsidy Program under Consideration in Parliament

November 20 update: Bill C-9 received Royal Assent on November 19, 2020. For detailed commentary from members of our Tax Group, please see here.

Bill C-9 creating the new Canada Emergency Rent Subsidy (the “CERS”) received its Third Reading in the House of Commons on November 6, 2020 and is now under consideration by the Senate.

The CERS, if enacted, will replace the now-expired Canada Emergency Commercial Rent Assistance (“CECRA”) program. CECRA, which was administered by Canada Mortgage and Housing Corporation, with assistance from MCAP and First Canadian Title, provided over $2 billion in commercial rent assistance from April to September 2020 to businesses that experienced decreased revenue as a result of the COVID-19 pandemic.

Whereas CECRA required landlords and tenants to enter into rent reduction agreements to receive forgivable, interest-free, government loans, the CERS is designed as a tax subsidy intended to mirror, in many respects, the Canada Emergency Wage Subsidy (the “CEWS”) in effect since April 2020. Bill C-9 operates as an amendment to the Income Tax Act (Canada) (the “Tax Act”).

The CERS will be administered by the Canada Revenue Agency (“CRA”) and provide direct rent and mortgage support to qualifying organizations on a sliding scale, covering up to a maximum of 65% of eligible expenses, with an additional 25% “lockdown support” top-up available to businesses subject to public health restrictions, in respect of the first three qualifying periods (i.e., September 27, 2020 to December 19, 2020). Eligible expenses include, inter alia, commercial rent, property insurance, property taxes and, subject to conditions, interest on debt obligations secured by a mortgage or hypothec.

When does the CERS apply?

The CERS will apply retroactively from September 27, 2020 and is slated to run through June 2021. The CERS “qualifying periods” will align with those of the CEWS: for example, Period 8 of the CEWS (September 27-October 24, 2020) will be the first qualifying period of the CERS.

The current eligibility parameters and subsidy amounts (described below) will apply until December 19, 2020, following which they may be adjusted by the federal government. Applications must be made within 180 days of the end of the qualifying period for which the CERS is being claimed.

The first three CERS qualifying periods will be:

  • September 27, 2020 to October 24, 2020;
  • October 25, 2020 to November 21, 2020; and,
  • November 22, 2020 to December 19, 2020.

Who is an “eligible entity” for purposes of the CERS?

In order to be eligible for the CERS, an entity must: 

  • be an “eligible entity” (as described below);
  • have eligible expenses;
  • experience a revenue decline ;and
  • file an application in the prescribed form and manner, which is attested to by the individual who has principal responsibility for the financial activities of the entity.

In addition, the entity generally must: (a) have had (or be deemed to have had) a CRA business number and payroll account number on March 15, 2020; (b) have had a CRA business number on September 27, 2020; or (c) meet certain other conditions.

An “eligible entity” includes:

  • a corporation or trust, other than a corporation or trust that is exempt from tax under Part I of the Tax Act or a “public institution” (as defined in the Tax Act);
  • an individual;
  • a registered charity and certain other tax-exempt organizations, other than public institutions; and
  • partnerships that are up to 50% owned by non-eligible members (e.g., public institutions).

What expenses are eligible for the CERS?

Eligible expenses (defined in the legislation as “qualifying rent expense”) include commercial rent, property taxes (including school taxes and municipal taxes), property insurance, and interest on commercial mortgages/hypothecs (subject to certain limits) for a qualifying property, less any subleasing revenues. Any sales tax (e.g., HST/GST) component of these costs is not an eligible expense.

Eligible expenses must be paid pursuant to written agreements entered into before October 9, 2020 (or pursuant to the renewal (on substantially similar terms of such an agreement) and must be in respect of a qualifying property (i.e., generally, real property located within Canada used by the eligible entity in the course of its ordinary activities). Expenses relating to residential property used by the taxpayer, payments between non-arm’s length entities, and mortgage interest expenses from properties used to earn rental income from arm’s length parties are not eligible.

How is the CERS calculated?

The Base Rate

Eligible expenses for each qualifying period are capped at $75,000 per qualifying property per qualifying period and are subject to an overall cap of $300,000 shared among affiliated entities per qualifying period. As a result, because of the maximum 65% base subsidy rate, the maximum monthly CERS benefit per property is $48,750 (65% of $75,000), and the maximum overall cap shared among affiliated entities would be $195,000 (65% of $300,000).

The base subsidy rate to be applied to eligible expenses will be calculated on a sliding scale in respect of the first three qualifying periods.[1]

Revenue Decline

Base Subsidy Rate

70% and over


50% to 69%

40% + [(revenue drop percentage - 50%) x 1.25]
(e.g., 40% + [(60% revenue drop – 50%) x 1.25] = 52.5% subsidy rate)

1% to 49%

Revenue drop x 0.8
(e.g., 25% revenue drop percentage x 0.8 = 20% subsidy rate)

Subject to the caps noted above:

  1. eligible entities experiencing a revenue decline of 70% of more will be eligible for a base subsidy rate of 65% of eligible expenses;
  2. revenue declines between 69% to 50% will be eligible for a base subsidy rate that declines from 64% to 40% on a sliding scale; and
  3. for revenue declines between 49% to 1%, eligible entities will be eligible for a base subsidy rate between 39% and 1%.

For purposes of determining the extent of the revenue decline, “qualifying revenue” is calculated in the same manner as under the CEWS program using normal accounting practices, but subject to the complicated requirements set out in the Tax Act. Very generally, revenue declines are calculated by comparing either (a) the change in monthly revenue, year-over-year, for the applicable calendar month, or (b) by comparing the current reference month to the average of January and February 2020 revenues. Note that if an entity has applied for the CEWS, it must use the same revenue-comparison approach for both programs. The same approach must be used for each of the three qualifying periods.

Lockdown Support Top-Up

An additional 25% top-up will provide additional support to entities temporarily forced to close or whose business activities are significantly restricted due to a mandatory public health order in effect for a period of at least a week, including a mandatory shutdown resulting from an outbreak of COVID-19. If the public health restriction is in effect for only part of a qualifying period, the lockdown support top-up will be pro-rated for the number of days that the business was affected.

In order to qualify for the additional 25% top-up, an entity must first qualify for the base CERS and then meet additional requirements to establish a significant restriction on its business. The 25% top-up is limited to $75,000 per qualifying property, but, unlike the base rate subsidy, is not subject to the overall cap.[2]

Conclusion and Further Developments

Bill C-9 has not yet been passed by the Senate nor received Royal Assent, and we will continue to monitor updates to the draft legislation.

As currently drafted, Bill C-9 may raise cash flow concerns for tenants and property owners who may be unable to make rent and interest payments prior to receiving the CERS subsidy. In response to such concerns, Deputy Prime Minister and Finance Minister Chrystia Freeland stated before the Senate Committee on National Finance on November 12, 2020 that the federal government intends to swiftly introduce legislation to formalize rent payable as an eligible expense. We will continue to track any developments.

Given the technical nature of the program, property owners and tenants who think that they may benefit from CERS should seek legal and other advisory counsel as soon as possible to assist them with assessing their situation, determining eligibility for the program, and navigating the application process when it is formalized.

For further information on the CERS, please contact any member of our National RPP or Tax Groups.


[1] See: Department of Finance, Backgrounder: Lockdown Support for Businesses Facing Significant Public Health Restrictions (November 5, 2020).

[2] For illustration, see: Department of Finance, Backgrounder: Lockdown Support for Businesses Facing Significant Public Health Restrictions (November 5, 2020).



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