When lockdowns were first announced, the first question many dentists and business owners had was, “How will I pay the rent?” Unlike staff wages, your place of business could not be furloughed. Rent was due regardless of whether your business was open or closed. Long term lease agreements were still valid and legal. Some could delay rent payments, but many had already given post-dated cheques to landlords which caused a cash crunch as the lockdown was extended month after month. The government’s response was to provide some rent relief. Looking back, it was too little and too late to really help most business owners.
While Government subsidies like the Canada Emergency Business Account (CEBA), Canada Emergency Wage Subsidy (CEWS) and Canada Emergency Response Benefit (CERB) were well received, the Canada emergency Commercial Rent Assistance (CECRA) program and subsequent Canada Emergency Rent Subsidy (CERS) were not.
The CECRA program provided tenants a 50% rebate of the rent paid for the months of April, May, June, July, August and September 2020. The problem was it required the landlord to give up at least 25% of the monthly rent. This led to many tenants not being eligible for the CECRA and therefore not receiving any benefits.
In response to the difficulties in accessing the CECRA, the government introduced CERS. CERS didn’t require landlord’s approval and was modelled after the CEWS. You would receive a rebate of rent depending on how much your billings/collections had decreased each month compared to pre-COVID times. The CERS was meant to piggyback off the success of the CEWS. The problem was the first application period was September 27, 2020, to October 24, 2020, a time when dental offices were already operational and when CEWS benefits were starting to wind down. Initially, CEWS provided a 75% rebate of wages paid up to $847 per eligible employee. However, by September instead of a flat rate of 75%, you received a pro-rated amount based on the % decrease for that period. If you had a 10% drop in billings/collections during the month, you would receive an 8% rebate. While CERS is vastly more accessible than CECRA, its actual impact was diminished for the following reasons:
Many dentists didn’t qualify every month. As practices reopened, dental billings and collections started to return to normal and the primary requirement of CERS was you had to have a drop in monthly billings/collections.
Rebate wasn’t significant. For those dental practices that did qualify, receiving 5% or 10% of your rent back didn’t amount to a whole lot of funds. A dental practice with monthly rent of $8,000 a month, a 5% rebate meant just $400.
Benefit wasn’t available during time of need. The initial months after the lockdown was when dentists didn’t know if they could pay rent. By the time CECRA came into effect, the rent was already paid.
Many of the government’s programs were well received and successful at helping dentists. Unfortunately, CECRA and CERS were not among them. What it did teach us is that owning your own dental building provides a lot more benefits than just saving rent. Being your own landlord means you always know how your next rent cheque will be paid. Setting aside an emergency fund in case of a disaster of at least 3 months’ expenses is a good safeguard to have in place.
This article was prepared by David Chong Yen*, CPA, CA, CFP, Louise Wong*, CPA, CA, TEP, Basil Nicastri*, CPA, CA and Eugene Chu, CPA, CA of DCY Professional Corporation Chartered Professional Accountants who are tax specialists* and have been advising dentists for decades. Additional information can be obtained by phone (416) 510-8888, fax (416) 510-2699, or e-mail email@example.com / firstname.lastname@example.org / email@example.com / firstname.lastname@example.org . Visit our website at www.dcy.ca. This article is intended to present tax saving and planning ideas and is not intended to replace professional advice.
As seen in the print issue of Oral Health October 2021