Landlord group asks for commercial tenant rent support, not a ban on commercial evictions
June 3, 2020
Posted by: REALPAC
June 3, 2020 – TORONTO – There are few sectors of the economy not adversely impacted by COVID-19. Owners of real property - particularly hotel owners, retail properties owners, and to a lesser extent office and industrial property owners - have been impacted. In the retail segment, enclosed mall owners and owners of strip and main street retail have been hardest hit. Many of those owners are themselves small businesses. REALPAC, a Canadian industry association representing national owners of commercial real estate, is requesting that provincial governments work collaboratively with both affected commercial tenants and property owners to develop and implement commercial rent support programs as Canada continues toward full economic recovery.
Since the beginning of the crisis, responsible commercial property owners have been working to support and sustain affected tenants. Due to businesses being forced to shut down as a result of COVID-19 and the ensuing high rent delinquency rates, landlords have also had to shoulder the burden of their tenants’ lost revenues. In the retail sector alone, a REALPAC survey found that national rent delinquencies for shopping centres stood at 64% for May, a 20% increase over April. For open air shopping centres and strip commercial retail, there was a 41% national rent delinquency rate, an 11% increase over April. These are clear indicators that commercial landlords are already facing significant financial challenges.
A commercial evictions moratorium is being proffered by some as a solution to tenants’ lost revenue, but such an approach ignores the resulting impact this has on property owners. Despite withdrawing the owners’ remedies, 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. The evidence from the evictions moratorium for apartment tenants is that many see it as an opportunity to simply not pay rent, whether they can afford to or not, encouraging free riders and economic looters. Similarly, a commercial evictions moratorium leaves the landlord with no effective remedies to ensure that tenants meet their lease obligations, as it removes any incentive to bring business owner tenants “to the table”.
Moreover, while temporary suspension of evictions may prevent the ending of some tenancies through the remainder of the pandemic, for the remaining majority of business tenants, rent payments will still be eventually owed to the landlord - a liability that could be burdensome in the future. Instead, a better approach would be to provide a rent bank supported by the province for affected tenants, tailored to those genuinely in need and unable to recover quickly. These programs should be put in place now and be available for those small business tenants slow to recover.
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. Mirroring the public sector’s strategy, responsible property owners were already working with affected tenants, ensuring that tenants in need are supported through the pandemic. Coupled with the newly implemented Canada Emergency Rent Assistance (CECRA) program now being activated by many landlords and tenants, there is considerable support for vulnerable tenants.
Businesses need to adjust for the new normal on a long-term basis. Instead of a commercial evictions moratorium, REALPAC is encouraging provincial governments to directly extend rent support to tenants to augment existing federal funding programs such as CECRA, rather than robbing landlords of their right to recourse for missed leased obligations.
MEDIA CONTACT: Michael Brooks, CEO, REALPAC, 416.642.2700 x225
REALPAC is the national industry association dedicated to advancing the long-term vitality of Canada’s real property sector. We champion our industry’s contribution to a flourishing Canada, and help strengthen the economy through growing employment, facilitating investment in and development of real estate, protecting the environment and growing strong urban centres nationwide.
With 109 member companies, our members include publicly-traded companies (almost all the REITs in Canada), pension funds, private companies, fund managers, asset managers, developers, government real estate agencies, lenders, investment dealers, brokerages, consultants/data providers, large general contractors, and international members. Our members represent all asset classes in Canada – office, retail, industrial, apartment, hotel, seniors residential – from coast, to coast, to coast.