Commercial landlords decry the blame shifting of eviction prohibitions

Commercial landlords decry blame shifting

Thursday, June 4, 2020

Advocates for the commercial real estate industry are warning provincial governments that a broadly applied prohibition on business evictions will risk undermining other key economic players needed for recovery from a COVID-19-triggered downturn. REALPAC — a national association representing many of Canada’s most prominent commercial landlords, real estate funds and institutional investors — urges direct, targeted government support for struggling commercial tenants rather than shifting that burden to their landlords.

“Suspension of evictions is a blunt policy tool that groups all tenants together, without distinguishing between those truly in need of support versus those who have no discernible disruption to their business,” a newly released statement from REALPAC submits. “Affected owners’ mortgage payments, employees’ salaries, property taxes, insurance and other operating expenses are still due. Most have families to support from the rent or retired shareholders who rely on the collective income.”

Thus far, British Columbia is the only province to impose restrictions on commercial evictions. Earlier this week, it enacted a decree under the provincial Emergency Program Act that will prevent the eviction of any tenant that would qualify for Canada Emergency Commercial Rent Assistance (CECRA) even if the subject landlord is not enrolled in the relief program. However, other voices are calling for a similar moratorium elsewhere and/or musing about landlords’ culpability for tenants’ COVID-19-related financial woes.

REALPAC characterizes the landlord-tenant dynamic as a chain of economic stress, with many commercial landlords likewise suffering a drop in revenue and beholden to their lenders. Notably, a recent survey of members revealed a 64 per cent rent delinquency rate in enclosed shopping centres in May, a 20 per cent upward spike from April’s delinquency rate. In open-air shopping centres, the rent delinquency rate surged to 41 per cent, an 11 per cent increase from April.

The association recommends provincially supported rent banks to augment CECRA and further support distressed tenants. This would additionally curb accumulation of debt to landlords — an outcome of an evictions moratorium that would be a lingering liability for business operators in the pandemic recovery period.

REALPAC also reiterates that many commercial landlords have registered for the CECRA program and/or devised their own rent deferral agreements with tenants. Yet, even forceful proponents for commercial tenants who have called for a moratorium on evictions express sympathy for landlords tasked with fulfilling the program’s registration requirements. The Canadian Federation of Independent Business (CFIB) reports receiving “hundreds of calls” to recount frustrations with the experience.

“Comments range from confusion over the amount of financial information required to apply, complex attestation forms and technical difficulties with the application portal,” a recent release from CFIB states.

Like REALPAC, CFIB endorses a direct channel for aiding tenants. “Allow tenants to access their share of CECRA support directly through the program or find another means to get money to those that need it,” it exhorts. “Fix CECRA by simplifying the application process, expanding the number of months it covers and reducing the 70 per cent revenue loss criteria.”

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