The Alberta government has banned commercial rental evictions until the end of August for tenants who don’t pay their rent because of COVID-19.
Bill 23, the Commercial Tenancies Protection Act was tabled in the legislative assembly on June 16. It immediately prevents the eviction of commercial tenants who have lost more than 25 per cent of their revenue due to the pandemic, been forced to close due to public health orders, or those who would qualify for federal rental support but their landlords have not opted to go with the program.
About 18 per cent of retail tenants and 16 per cent of all commercial tenants failed to pay their rent in May, according to industry sources.
The new measures will help address shortfalls in the federal Canada Emergency Commercial Rent Assistance (CECRA) program, and will give eligible business owners piece of mind as they reopen and help with the provincial economic recovery, according to Annie Dormuth, Alberta provincial affairs director with the Canadian Federation of Independent Business
The Alberta legislation offers no rent reductions. It requires that landlords and tenants come up with a plan to repay the rent in full but does not define specific terms of what these deals have to look like.
“It’s important to emphasize that both commercial landlords and their tenants are facing unprecedented circumstances. Landlords are also struggling,” said Alberta Economic Development, Trade and Tourism Minister Tanya Fir. “So we have to also help ensure that landlords don’t miss out on deferred rent by requiring that landlords and tenants work together to develop a rent payment plan for missed payments.”
Businesses that can show a 70 per cent reduction in revenue due to the pandemic restrictions are eligible, which would include most retailers that were not allowed to open until recently, such as beauty salons, restaurants and fitness centres.
The assistance may not be enough to stop all evictions, post-pandemic, according to Ali Baniasadi, partner, business law, real estate with, KPMG Law LLP.
Baniasadi said that if a tenant cannot pay their share of rent the normal eviction powers allowed a landlord would apply once the emergency measures end.
The Alberta plan follows the lead of British Columbia, which banned commercial evictions on June 1, but the Alberta legislation extends the ban longer. B.C.’s eviction ban was to end on June 30. B.C. said it will extend the eviction ban if CECRA is also extended.
As in Alberta, landlords in B.C. who are eligible for emergency federal rent relief and choose not to apply will not be able to evict businesses that aren't able to pay rent.
The B.C emergency order restricts lease terminations, rent-repayment lawsuits, and repossession of goods and properties.
The CECRA requires that tenants who have lost at least 70 per cent of their income due to COVID-19 pay 25 per of the rent owing, with Ottawa kicking in 50 per cent and landlords foregoing 25 per cent of the rent payment.
A number of Alberta landlords have not signed up for the program since many had already implemented rent deferral programs before CECRA came into effect and all others remain exposed to ongoing costs, according to NAOIP Edmonton, which speaks for commercial owners and developers.
As examples, First Capital Real Estate Investment Trust (REIT) created a $30 million program to provide rent relief to their small business tenants; retail landlord Ivanhoé Cambridge, which owns the giant CrossIron Mills mall north of Calgary, began offering tenants rent deferrals back in March; and RioCan REIT is offering a 60-day interest-free rent deferral to commercial tenants who ask for it.
“Commercial property owners still need to pay mortgages, utilities and property taxes, and these bills have not been forgiven – so property owners and tenants need to work together,” said Anand Pye, executive director of NAIOP Edmonton.” An eviction ban drives an unnecessary wedge between tenants and property owners, most of whom were working on amending agreements to support tenants through COVID before government got involved.”
Pye added that many commercial property owners are having difficulty using the CECRA program, and many tenants don’t qualify “especially ones that open in June, since that month is used to calculate your average revenue loss.”
NAIOP Edmonton would prefer to see the federal government provide a direct subsidy to tenants, and continue to require tenants to meet the terms of their lease obligations.
“This would be the most effective way to save businesses and ensure that Canada is well positioned to bounce back after the COVID-19 pandemic,” Pye said.