Tenancy law changes every renter should know about

How businesses can negotiate with their landlords during the COVID-19 crisis.


Be empathetic, knowing that it’s likely in your landlord’s best interest to keep you from defaulting or breaking rent.

As the days of the week blur in the pandemic, the 1st of every month still looms large for small business owners.

Rent still may be your biggest fixed expense as you work to rebuild revenue lost due to COVID-19.

Fortunately, rent assistance is on the way.

On Thursday, April 22, the federal government announced a new loan program designed to support businesses (including commercial property owners i.e. landlords) afford rent. While the assistance is sorely needed, the loan program still requires that owners pay 25% of their existing rent costs at a time, when business revenue may be down to zero. And as a loan, the Canadian Emergency Commercial Rent Assistance (CECRA) means that commercial property owners are on the hook to pay back the funds designed to temporarily cover lost revenue due to COVID-19.

It’s in neither side’s interest to not come to an agreement to “pay the rent.” Temporarily, it’s cheaper for businesses to stay in business than to fall out of it, especially if there are other economic stimulus measures to help them along. Commercial property owners do not want to go hunting for new tenants when the local economy isn’t exactly humming along.

To help both sides land on a compromised solution, let’s explain how CECRA works and offer some advice for business owners in dealing with their landlords. Just like any negotiation, if each side can empathise with the other, then the likelihood of a favorable settlement increases. Here’s how to get started.

Think of CECRA as a lifeline, not a bailout

The Canada Emergency Commercial Rent Assistance (CECRA) will extend loans to commercial property owners (landlords) if they reduce their tenants rental costs by 75% for the months April, May, and June.

To qualify, tenants have to pay less than $50,000 per month in rent and who have temporarily ceased operations, or can document at least a 70% drop from pre-COVID-19 revenues.

The loan program means property owners have the funds to be able to afford lowering their rents.

To understand how this looks in practice, so you can talk to your landlord more persuasively, take a look at this hypothetical business, Jane’s Deli. 

Jane owns Jane’s Deli. The business pays $5,000 in rent a month to Astrid, its commercial landlord.

Jane’s lost 90% of its income in April because of the COVID-19 lockdown.

Relying on CECRA, Astrid applies for a loan of $3,750 and agrees to reduce Jane’s rent by 75%, or from $5,000 to $1,250. Great. Right? Everyone wins. But as a loan, Astrid has to pay at least 50% of the principal back, or $1,875. Instead of earning $5,000, together with Jane’s 25% payment, Astrid will earn $3,125.

Meanwhile, with nearly zero revenue coming in, Jane’s Deli still has to pay $1,250 in rent.

While CECRA may not feel fair, without it, commercial property owners would have even less incentive to help their tenants, except for the fear of losing them altogether.

It is under these kinds of tough situations and tensions that landlords and businesses are grappling to find a compromise.

Now is the time to highlight how great of a tenant (and business) you are

Property owners are more likely to be favorable to tenants who are proactive, cooperative, and have a good track record paying their rent. 

Pitch a pay-what-you-can approach. Besides highlighting your past record, to make a case for a reduction in rent, it pays to have a plan for how your business will recover. While no one can guarantee how the post-COVID-19 economy will perform, you can present a scenario(s) that shows you’ve thought it through.

Be ready to show how COVID-19 has affected your ability to operate your business; include proof of loss from financial statements.

Your landlord will likely evaluate your case based on criteria like size and terms of your lease, the contingency plans you have in place, and the long-term potential of your business.

The better you can demonstrate a good track record and plans for recovery, the more likely you and your landlord can agree on a temporary arrangement to benefit you both.

Aiming to make your business more viable? Vancity has put together a Unity Pivot loan program to help businesses rapidly add a new line of revenue. If they weren’t already helping us all out with their beer, using the Pivot loan, craft breweries could manufacture hand sanitizer, for example.

Examine the terms of your lease and insurance policies

Before you call up your landlord and ask for a chat about reducing the rent your business pays, review the terms of your lease, and your contractual obligations as a tenant. You want to be well versed in your contract before you use it to help your business look for ways to reduce the rent it pays.

Force majeure may help. It may be worthwhile to seek legal advice, such as whether unforeseeable circumstances prevented your business from fulfilling a contract. Clauses like “force majeure” could potentially help you argue for rent leniency.

Insurance could come to the rescue. Similarly, your insurance broker can advise if your business’s insurance coverage would allow a claim to help your business afford rent due to a “revenue interruption.” Before you get your hopes up, just note that many policies do not cover the fallout from a pandemic like COVID-19, but it is worth a conversation with your insurance broker to see what options you may have.

Again, be ready to discuss how COVID-19 has affected your ability to operate your business.

Rent relief may take many forms

Not paying rent or paying less rent are not the only two options for you and your business to consider. 

Looking at each rent relief situation on a case-by-case basis, property managers and landlords will likely review requests considering these possible solutions:

  •  a rent deferral to buy you time now, with expectation to repay the full amount later;
  • a reduction in cost, or “abatement,” over a period of time;
  • rent forgiveness, for a specific period, where you don’t have to pay anything;
  • increasing future rent costs;
  • deferring the rent and charging interest;
  • increasing the length of your contract;
  • offering a loan to cover the rent;
  • some combination of the above.

Be prepared to negotiate and do the math. Any rent relief from your landlord will likely come with conditions and terms.

Carefully evaluate whether the proposed solution and conditions make sense for your business. With banks and credit unions providing business loan assistance, like Vancity’s Unity program, be especially careful to not agree to a loan from your landlord without considering alternative options.

Get it in writing. Whatever solution you land on, it is critical to get the new agreement or amendment in writing and signed by both parties, ideally with the support of a legal service. The arrangement should clarify the net payment over the net period of time by the defined parties. Vagueness will likely cause bigger problems later.

There is strength in numbers.

If you’ve tried this approach, and not had any success, consider reaching out to other tenants and businesses in your building. Learn what success or not, they have had and discuss whether it makes sense to speak with the commercial property owner or management service as a group. The property owner may prefer having one policy and solution that applies to all tenants versus taking a piecemeal approach. Again, if you go this route, continue to be empathetic.

Commercial property owners and management companies are businesses too.

It is unquestionably a hard, confusing, and challenging time to be a business owner today. To help your business lower its fixed expenses like rent (many of the points here may also work for other service providers), put yourself in the position of your landlord. Without presenting a plan and asking to pay nothing in rent will likely not go over well. Aim to present a realistic plan that helps both sides feel like they can and will emerge from the COVID-19 fallout together.

We are here for you.

It’s safe to say that COVID-19 will affect your business. But it doesn’t have to destroy it. You may be facing immediate concerns, but a thoughtful, well-planned approach in the short term will help your business survive well beyond this current crisis. There is help and Vancity is here to help you.

Helpful links and resources

Here are a number of small businesses resources to help guide you through these trying times.

This article is part of a Vancity series to help breakdown and explain COVID-19 economic stimulus measures and other forms of financial assistance for individuals and families, businesses, and investors – so they can endure and thrive during these difficult times.

This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use.  

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