Landlords choosing to evict commercial tenants rather than apply for government aid

 

Typically, when you walk into Just Train It Boxing/Just Nutrition (JTI) studio in Oakville, you are greeted with the sound of boxers hitting a heavy bag.

The unmistakable sound of leather hitting leather, the clinking of chains as the bags sway with the force of repeated strikes, as the boxers work on their technique.

You might also be greeted with the sound of athletes working on their strength and conditioning using the gym’s exercise equipment, or coaches offering tips on how their boxers can improve their form.

However, lately, it has been silent inside the gym—no boxers hitting heavy bags, no athletes lifting weights, no coaches offering instructions.

While the pandemic has been hard on everyone, it has been especially hard on small business owners. Many, such as fitness studios and boxing gyms, have been forced to close their doors in order to help prevent the spread of the virus.

During this time, many small business owners in the fitness industry have had no income—they can’t make money if they’re not allowed to let their clients inside to train.

Despite this, landlords are still demanding their tenants continue to pay their rent, despite the fact they might have no means to do so.

While many politicians, including Prime Minister Justin Trudeau, have said the Government is working on providing assistance to businesses facing dire circumstances, many of these programs have been just that—words.

Further, many business owners wrongly believed the Government’s promise that no one would be evicted during the pandemic extended to businesses as well.

For commercial tenants, many incorrectly believe they have the same rights as residential tenants—this is not the case,” Aaron Meng, a lawyer and the managing partner of Aaron Meng Law Professional Corporation, a law firm in Toronto, says.

Residential tenants are under the Residential Tenancies Act (RTA) and commercial tenants are under the Commercial Tenancies Act (CTA). The RTA heavily favours tenants, (especially during this pandemic) significantly more so than its commercial counterpart,” Meng says. “For example, landlords cannot evict tenants under the RTA for non-payment of rent without a court order.”

Commercial tenants have no such protection. Under the law, if they don't pay rent, the tenant would be deemed in default, meaning they would be in breach of contract, and the landlord would be able to bar them from entering the premises, and seize certain items still inside that belong to them. This is known as distress, and the tenant also faces the risk of being sued for rent owed and future rent for the term of the lease” Meng says.

In order to help prevent small businesses from having to deal with this, the Federal Government has implemented some programs to assist Canadian business owners during these unprecedented times.

However, many entrepreneurs believe these programs need extensive overhaul to actually provide tangible aid to businesses that are in dire financial circumstances.

The Canadian Emergency Wage Subsidy supports employers that are struggling to pay their employees. However, it doesn’t affect businesses such as fitness studios and gyms—since they’re currently closed, they aren’t paying employees.

The Federal Government has also implemented a program called the Canada Emergency Commercial Rent Assistance (CECRA) program, which would lower rent for small businesses by 75 per cent for three months.

Business owners would pay only 25 per cent of their rent, while the government would cover 50 per cent, and the landlord would have to agree to forgo the remaining 25 per cent—they would also have to sign an agreement to refrain from evicting said tenant while they are part of the program.

Many small business owners believe this program doesn’t actually benefit them, as the government has allowed landlords to decide whether they will participate—and, because they don’t really have any financial incentive to do so, many aren’t.

This is the case for JTI.

Amanda Cabral, co-owner and registered health coach with JTI, says JTI’s landlord initially told them there wasn’t enough information about CERCA yet, to warrant an application to the program.

However, since their initial conversation, Cabral has tried to discuss the program further with Briarlane Rental Property Management Inc.—the property manager for JTI's landlord—but they have refused to even respond to her emails.

According to Cabral, JTI is one of six businesses that share a commercial space in Oakville—they’ve all been forced to close due to the pandemic, and Briarlane hasn’t been accommodating during this time.

We asked for a rent deferral, but our landlord refused and said they expect us to pay,” Cabral says. “We’ve been able to pay for April and May, but we had to go into debt to do so. We were hoping our landlord would apply to the program for us for June, as we’re unsure how we’re going to pay rent for the month otherwise.”

While Cabral’s concerned about how she’ll be able to pay rent for June without financial assistance from the government, she’s also afraid of what will happen if she does not pay.

We’ve been at this location for the last seven years, and we expanded to a larger unit beside us in the same complex last fall, signing a new, five-year lease. We have invested $100,000 in renovations and upgrades using personal loans, so we really aren’t in a position to just pack up our things and find a new location,” she says.

While Cabral is frustrated with her landlord, she’s even more frustrated with the program itself. “For this program to truly benefit small business owners, it must be made mandatory for landlords to apply, or be up to the tenant to apply—irrespective of the landlord’s consent,” she says. “Right now, landlords have no reason to apply, as it would require them to agree to reduce their income by 25 per cent per unit.”

The government has also been very slow to release the details related to this program, which is part of why we still need to pay our rent in full, according to our landlord,” she continues.

Unfortunately, JTI’s situation isn’t an isolated case. According to Jennifer Huggins, president of Boxing Ontario, this is affecting the majority of gyms across the province.

This is something that is affecting about 80 per cent of the gyms that are part of Boxing Ontario, these gyms’ landlords are insisting they continue to pay their rent in full, despite the fact none of them have any money coming in right now due to the Province-mandated closure,” Huggins says.

Huggins is also the owner of Kingsway Boxing Club, which has two locations at Jutland Road and Kipling Avenue and Bloor Street West and Royal York Road in Etobicoke, which is also experiencing financial hardship due to the pandemic.

Between our two locations, we’re paying a lot in rent, and our landlords are unsure they will be able to help us—though our rent is partially deferred for one location,” Huggins says. “I don’t understand why the government would mandate us to shut down, but not mandate our property managers to take care of us while we’re unable to operate.”

There are so many requirements for businesses to be able to qualify for the assistance the government has provided so far, and many of us simply aren’t able to meet them, so, as much as the government has claimed they’re doing all these things to help businesses that are struggling, the only thing they’ve actually done is force us to close, and effectively put us in this position,” she continues.   

Moreover, while JTI and Kingsway Boxing Club have managed to avoid eviction, at least for now, other gyms haven’t been so lucky. The iconic Atlas Boxing Club in North York is one such COVID-19 casualty.

After gyms were forced to close, Atlas, former home of two-time Canadian Olympian, 1992 and 1996, Domenic Filane Figliomeni; 1988 Olympic middleweight silver medalist Egerton Marcus; and 1988 Olympic super heavyweight gold medalist, and former heavyweight champion of the world, Lennox Lewis, was unable to continue paying rent and subsequently evicted.

On April 1, Atlas’ landlord posted a notice of distress on the gym’s front door, demanding rent in full.

Due to the forced closure, Atlas had no money to pay their outstanding rent, and their landlord locked them out on April 6.

By May 1, the landlord had already sold everything that was inside, including cardio machines, weight training equipment, heavy bags, and the boxing ring.

The government aid didn’t come fast enough to help us,” Armand Teodorescu, owner and head coach of Atlas says. “But even if the program had been implemented sooner, I don’t think our landlord would have gone for it.”

Many small businesses, like my own, have indeed fallen through the cracks. I don't see any program that would help us. True family-run businesses are not getting the help they need,” Teodorescu says.

Teodorescu agrees with Cabral that landlords should not have a say in whether business owners can apply for CECRA. “If nothing else, the government will see how unreasonable your average commercial landlord is. Very few are willing to lose even 25 per cent of their monthly income, despite an International crisis,” he says.

Huggins believes the type of location also plays a factor. “Because many gyms are located in industrial parks, and large commercial facilities, there’s often a long list of business owners who would be interested in renting the space,” she says.

As a result, most landlords would be more inclined to kick out a tenant who cannot pay and open up the space for a tenant who can, rather than accept a 25-per-cent decrease in rental payments.

If the Government doesn’t revise the CECRA program, it could mean more gyms going out of business, which would be a tragedy—not only for the owners losing their business, but also for the people who are losing their training facility.

Many gyms provide programs for youths in the community, as a way to help promote exercise and physical activity, as well as keep them out of trouble.

Gideon Boxing Academy in Scarborough is one such example.

Gideon, which is run by head coach Horace Hunter, offers programs to help guide the youth in the community—activities intended to keep them busy and off the streets.

Hunter believes these programs are vital for youth in the community, as they provide a sense of purpose they otherwise might not have.

We run regular programming throughout the week, in the evenings on weeknights and during the afternoon on weekends,” Hunter says.  “While the program is geared towards competitors, those who participate are not required to compete—most of the youth in the program won’t actually make it to competition.”

Further, Hunter has seen first-hand how programs such as the ones offered by Gideon can benefit teenagers and young adults. “The time these kids spend training is intended to provide them with an opportunity to learn about life and themselves—they learn about accountability, respect, and hardwork, while developing physical strength, focus, discipline, and confidence,” he says.

However, offering a place to train isn’t the only benefit these gyms provide, they also offer members of the community, particularly young members, with a coach—someone who functions as a trainer, a role model, and sometimes even a mentor all at once. 

Someone who helps his or her boxers navigate through life’s difficulties--things they may be unwilling or unable to discuss with their parents.

One of my young boxers was heavily involved in drug trafficking. He spoke to me openly about it during our training sessions, and I would always encourage him to stop and get out of the game,” Hunter says. “It didnt happen right away, but when the opportunity presented itself, he left that life behind and become a soldier in the military—something he might not have been able to do without the discipline boxing instilled in him.”

Another one of Hunter’s boxers was dealing with suicidal thoughts. His parents reached out to Hunter to see if he could offer some guidance or words of wisdom—considering how much this young boxer looked up to his coach, his parents wanted Hunter to talk to their son and perhaps offer some advice.

After speaking with him for a few hours, I was able to reach him and eventually redirect his path. He is still alive today. While it has been many years since I have trained him, we still keep in touch,” Hunter says.

But, without further government assistance, communities are at risk of losing these pillars—Atlas has already had to relocate, Teodorescu is unsure where he will set up shop next, and Cabral is concerned about the status of JTI, as is Huggins for Kingsway Boxing.

Allowing landlords to refuse to provide aid to these small businesses and evict them doesn’t just hurt the business owners themselves—we all suffer because of it.

UPDATE

Since the time of publication, Briarlane Rental Property Management has agreed to move forward with the CECRA program as third-party property managers for the landlord of JTI.

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