We are facing a huge public health and economic crisis, and we need commercial rent relief now.
For the most part, small businesses are not in a position to take on more debt or benefit from tax deferrals. Reductions in property taxes are not a solution, for the simple reason that the savings enjoyed by commercial landlords are all too often not passed on to the tenant.
Yet our survival is necessary to give people job security as we come out of the current crisis.
Commercial rent is the biggest fixed, “overhead” cost for many small and medium businesses.
With most of us forced to close for public health reasons, we need help now so we can afford to re-open as soon as it’s safe. Commercial rent relief must take into account the time needed for consumers to return to our businesses and for spending to return to pre-crisis levels.
[Commercial rent is] the biggest expense I have and the owner of our building has not given flexibility. It makes me stressed and anxious about how I can afford to pay my business expenses and personal expenses without going further into debt. A rent reduction, abatement, or grant from the government would ensure my business will still be running when COVID-19 is over. – Retail store owner, Kitchener
We need immediate relief in the form of:
- Rent abatements for tenants to cover commercial rent costs, starting April 1, 2020, lasting as long as public health officials order us to self-isolate and physically distance, and taking into account the time needed for businesses to recover from closures and consumer spending to return to pre-crisis levels; AND/OR government funds allocated to cover the same costs.
- A freeze on commercial rent evictions until the economy recovers from COVID-19.
I’m currently in negotiations with my landlord. I managed to pay April rent, and he is (hopefully) letting me defer for May. While this is helpful in the short term, in the long term this means I will be saddled with debt. And we can’t rely on the kindness of our landlords. I need immediate help. My projections show that I can keep my store alive through the summer…but all this depends on loan approvals, which means more debt. Small businesses need a solution that won’t leave them worse off than when they started. – Retail store owner, Toronto
To mitigate future crises, we need:
- Commercial rent regulations and guidelines, similar to what we have for the residential rental market.
- Limits on increases to commercial rent.
- Transparency, so tenants can know what landlords are paying in property taxes and utilities.
- Fair maintenance guidelines, so tenants aren’t solely financially responsible for improvements to properties they don’t own.
Background
Small and medium businesses, including those in the Better Way Alliance, have been bringing forward concerns about the unregulated commercial rent market for years. Yet we have seen nothing from the government to help businesses manage this unwieldy cost and reign in the power of commercial landlords.
Over the last decade, business after business has shuttered due to unprecedented and unmanageable rent hikes (sometimes doubling or tripling the rent overnight, especially in large cities like Toronto and Montreal).
For example, after 30 successful years, a Toronto bakery was forced to close last year when their monthly rent tripled from $3,000 per month to $9,000 per month. Another example:
I opened Holy Oak in 2009 and ran it for 8 successful years. It was a community cafe and bar hosting live music and LGBT events nightly. It ended up being quite the community hub.
Slowly the rent went up and eventually, the building was bought by someone who owns multiple buildings in the city.
The new owner didn’t want us there and I couldn’t even sell the business. I had to close. – Justin, Holy Oak, Toronto
Unregulated commercial rent has forced many businesses to close, even before the COVID-19 crisis.
In the present crisis, businesses forced to close need urgent help.
It must take the form of rent abatements (cancellations or reductions) — not deferrals. Deferrals lead to additional debt, making it impossible for small and medium businesses to sustain ourselves and recover from the crisis.
Support could also take the form of grants — cash in hand for commercial rent.
Immediate relief is urgently needed and necessary if businesses are to remain viable and keep people employed.
Unfortunately, the scale of rent abatements or grants now required to stave off business closures and bankruptcy is much larger than it would have been had regulations on commercial rent increases been in place sooner.
The Better Way Alliance is a growing movement of businesses supporting decent wages, paid sick days, and fair scheduling laws. Decent work is good for business. Our members employ more than 30,000 Ontarians. Industries represented include services, retail, food and beverage, and manufacturing.
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