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The Federal Government proposed new targeted, direct supports for businesses, non-profits and charities facing ongoing economic challenges amidst the second wave of the COVID-19 pandemic. For organizations that are subject to a lockdown and must shut their doors or significantly limit their activities under a public health order issued under the laws of Canada, a province or territory (including orders made by a municipality or regional health authority under one of those laws), a top-up under the new Canada Emergency Rent Subsidy is available to provide additional support.
The Lockdown Support would be available retroactive to September 27, 2020, until June 2021, during periods when businesses are facing eligible public health restrictions. The government is providing the proposed details for the first 12 weeks of the program, until December 19, 2020. The proposed program would align with many aspects of the Canada Emergency Wage Subsidy.
To be eligible for the Lockdown Support a business must also qualify for the base Canada Emergency Rent Subsidy.
Effective September 27, 2020, property owners that rent to non-arm’s length tenants whose operations have been impacted by public health orders are eligible for the Lockdown Support providing all other conditions for the program are met.
If your organization is not subject to qualifying public health lockdown restrictions, but you are currently experiencing a decline in revenues, you may still be eligible for the Canada Emergency Rent Subsidy.
The Lockdown Support of 25% would be available to organizations with locations that are temporarily forced to close or temporarily have their business activities significantly restricted by a public health order issued under the laws of Canada or a province or territory.
Specifically, a public health restriction would be an order that meets the following conditions:
For an organization to qualify for the Lockdown Support for a qualifying property, the following conditions must apply:
If the organization is subject to a public health restriction and has to cease activities for only part of a qualifying period, the Lockdown Support would be pro-rated for the number of days in the period during which the relevant location was affected.
The following examples illustrate some common circumstances where an organization qualifying for the base subsidy may have qualifying property (i.e., a location) that would be eligible for the Lockdown Support.
The following examples illustrate some common circumstances where an organization would generally not be eligible for the Lockdown Support:
Example 1:
Sonia is the owner of a gym that was fully locked down on September 20 under provincial order. In September, her revenues were down by 50% because of the physical distancing measures, and her revenues in October will fall to zero. Her rent expenses for the period are $10,000. Sonia will be eligible for the 25% Lockdown Support, or $2,500. In addition, Sonia will receive a base rent subsidy of 65%, or $6,500, for a combined total of $9,000.
Example 2:
Restaurant Inc is a chain of restaurants with 10 locations. In September, revenues were down 70%, and in October, revenues were down over 80% when the dining rooms of six of their 10 locations were shut down under a regional public health order effective October 10. Restaurant Inc incurred rent costs of $400,000 in respect of the period, $120,000 of which related to the six locations closed by public health order. Under the rent subsidy, Restaurant Inc will be eligible for a base subsidy rate of 65% plus the new Lockdown Support of 25% with respect to the six locations closed by public health order for the days they were affected (in this case 15 days out of the 28-day period). As shown in Table 3 below, Restaurant Inc will be able to benefit from the base subsidy and the Lockdown Support. The base subsidy would apply on $300,000 in eligible expenses (the monthly cap), for a benefit of $195,000. The Lockdown Support is only capped per location, meaning it would apply on $120,000 of eligible expenses ($20,000 x 6), and is pro-rated to the number of days in the qualifying period that the business was affected by the public health order. As such, the benefit associated with the Lockdown Support would be of $16,071 ($120,000 x 25% x 15/28). This would result in a total rent subsidy of $211,071 for the month of October.
| Subsidy rate | Eligible expenses | Eligible days | Subsidy | |
| Base rent subsidy | 65% | $300,000 | 28 | 65% x $300,000 = $195,000 |
| Lockdown Support | 25% | $20,000 x 6 = $120,000 | 15/28 | 25% x $120,000 x 15/28 = $16,071 |
| Total | $211,071 |
Example 3:
Ted owns two companies: Ted’s Restaurant Inc. and Ted’s Property Company. Ted’s Restaurant Inc. rents its space from Ted’s Property Company.
A public health restriction requires Ted’s Restaurant Inc. to shut down for several weeks.
Due to their common control, Ted’s Restaurant Inc. and Ted’s Property Company would not be considered as dealing at arm’s length for tax purposes. As a consequence, the rent Ted’s Restaurant Inc. pays to Ted’s Property Company would not be eligible for the rent subsidy or Lockdown Support. Instead, the mortgage interest, property taxes and real property insurance paid by Ted’s Property Company could be eligible expenses for the rent subsidy, but because the operations of Ted’s Restaurant Inc. (and not Ted’s Property Company) were required to cease, Ted’s Property Company would not be entitled to the Lockdown Support.
In contrast, if Ted’s Restaurant Inc. also owned the property, it would be entitled to both the rent subsidy and the Lockdown Support on the mortgage interest, property taxes and real property insurance paid in connection with the property. The draft legislative proposal would ensure that Ted’s Property Company could qualify for the Lockdown Support.
