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Eviction bans are not expected to hurt commercial landlords: Colliers

·Financial Journalist
·4 min read
TORONTO, ON - May 15  The Dock coffee shop on Queen street east near Logan has closed and is now for rent. Olivier Benchaya knew from early in the COVID-19 shutdown that Canada's business community was headed for significant upheaval, but even weeks later, the restructuring and insolvency partner at Richter is still trying to grasp the severity of what's ahead for the country's most troubled companies. continue at the corner of Bloor and Church. The COVID-19 pandemic continues to dictate isolation and distancing in Toronto and around the world. covidpd corona coronavirus covid May 15 2020        (Richard Lautens/Toronto Star via Getty Images)
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Commercial landlords across Canada will be confronted with many challenges after months under lockdown, though eviction bans are not expected to be one of them, according to John Duda, the president of real estate management services for Colliers Canada.

“There aren't a lot of new tenants out there so landlords aren’t running out there trying to evict people. It's a last resort. It's always the last resort,” Duda told Yahoo Finance Canada.

British Columbia was the first province to impose an eviction ban at the beginning of June. The province’s finance minister stated that commercial landlords refusing to apply for the federal assistance program to alleviate financial strains on their tenants would be banned from evicting those tenants over the next month. New Brunswick, Nova Scotia, Saskatchewan, Quebec, and Alberta have introduced similar bans to help small businesses during the pandemic. Ontario was the latest to announce eviction bans this week with premier Doug Ford stressing that landlords “have to be fair and help out”.

“What we think this actually does do, is the tenants who were doing badly before COVID, and are simply doing way worse now, it means the inevitable is just going to get delayed,” Duda said.

Duda said businesses in that situation are a small portion of tenants, not a regular trend he sees among his client base of over 200 landlords across the country.

“At the end of the day, the landlords want people to be paying rent.”

During the COVID-19 crisis, paying rent hasn’t been easy for many businesses. This week, data from Colliers Canada showed that 16 per cent of commercial tenants did not pay rent in May. The report added that rents are expected to further deteriorate in June before improving in July and August. This data was collected from a survey of about 7,100 tenants as a follow-up to the April report, which found that 21 per cent requested rent relief and close to half of those tenants expressed that they weren’t able to pay April rent.

This month, 39 per cent of tenants who requested rent relief in April couldn’t make payments for May. 19 per cent made partial payments and the remaining 42 per cent paid in full.

Relief programs for commercial tenants have also been mired in confusion, according to Duda. “The big question mark which is affecting whether people pay or not right now is the CECRA program. And it was so ill-defined that landlords couldn't submit and didn’t quite understand, that it really froze a lot of people. This program actually stalled payment.”

The Canada Emergency Commercial Rent Assistance (CECRA) program was launched in late May, and is aimed at providing relief for small businesses struggling under commercial rents, having the program and property owners cover 75 per cent of the rent burden.

More details have become clear over the course of the week, explained Duda, including the announcement that tenants would be able to disclose their financial impact in an attestation to the government proving they are eligible for the program without having to disclose their financials to the landlord. “That's a big point for both parties,” Duda said, “Huge point, in fact, because it's basically exposing yourself in a way that you wouldn't want to with somebody who you have to negotiate [with].”

These are the segments of commercial tenants unable to make payments towards rent in May by province. The data was collected in a survey by Colliers.
These are the segments of commercial tenants unable to make payments towards rent in May by province. The data was collected in a survey by Colliers.

Businesses were affected differently depending on the province, with Quebec having the largest segment of tenants unable to pay rent at 27 per cent, according to Colliers’ regional data. Alberta was the second hardest-hit with 24 per cent, likely stemming from the energy sector’s downturn during the pandemic leaving businesses with less revenue, Duda explained. “The deterioration of the price of oil further during COVID has just caused more havoc. It's not all COVID-related. It is oil and gas related.”

B.C. fared the best out of the targeted provinces with 14 per cent of tenants unable to meet their rent obligations. Duda credits its success in flattening the COVID-19 transmission curve and ability to bounce back from lockdown.

“I would say the curve is smoother meaning they're going back sooner. And the traffic in the mall is just over, 80 per cent of what it was pre-COVID. So people are eager to get back they are out there they are shopping they're doing things like they did before with some restrictions.”

Some of these restrictions include curbside pick-up, but even with these limitations, Duda said 90 per cent of tenants at the Lansdowne Centre in Richmond, B.C. are open again.

Despite the fallout of the pandemic on business owners and landlords, Duda noted that the rent non-payment figures in May were better than the firm had anticipated. He believes that rent deferrals and collaboration between landlords and tenants helped to soften the blow.

“I think this idea of co-operation is in everybody's best interest. And it's when either party doesn't cooperate, that you end up with a bigger problem.”

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