The Trials of Small Business Tenants in the Shadow of Developer Practices Post-CERS

By People of BC 

In times of unprecedented hardship, the fabric of society is tested, revealing both its strengths and frailties. The COVID-19 pandemic, a crisis unlike any in recent memory, brought forth a cascade of challenges that rippled through every sector of the economy. Among the most affected were small business tenants, who found themselves at the mercy of both a faltering market and the stringent demands of their landlords. As the Canada Emergency Rent Subsidy (CERS) reached its terminus, a new chapter of struggle began—a tale of power imbalances, legal entanglements, and the quest for equitable treatment.

The Lifeline of CERS and Its Aftermath

The Canadian government, recognizing the peril faced by businesses, introduced the Canada Emergency Rent Subsidy (CERS) to provide relief to those grappling with the economic fallout of the pandemic ^[1]. This subsidy was a beacon of hope, allowing businesses to stay afloat amidst closures and reduced consumer spending. However, as the program concluded, many small businesses stood on precarious ground, facing the full brunt of rental obligations without the cushion CERS provided.

The Plight of Small Business Tenants

With the exhaustion of CERS, small business tenants found themselves in a vulnerable position. The protective veil of government support lifted, exposing them to the raw realities of contractual obligations. Developers and large property owners, such as Wesgroup Properties, held the leases that dictated the terms of occupancy. In the industry, this shift often leads to what is termed a “lease enforcement phase,” where landlords intensify efforts to collect overdue rent or reclaim their properties ^[2].

Wesgroup Properties: A Closer Examination

Wesgroup Properties, one of Western Canada’s largest private real estate companies, has been at the forefront of urban development for decades ^[3]. While the company has contributed significantly to the growth and modernization of cities like Vancouver, it has also faced criticism over its dealings with small business tenants and community stakeholders.

Controversial Redevelopment Projects

One of the notable controversies involving Wesgroup centers around the redevelopment of industrial lands and the displacement of long-standing businesses. For instance, the company’s redevelopment plans in the Brewery Creek area led to concerns about the loss of cultural heritage and affordable commercial spaces for artists and small enterprises ^[4]. Critics argued that such developments prioritize profit over community needs, eroding the unique character of neighborhoods.

Affordable Housing Commitments and Federal Funding

Wesgroup has also been a recipient of federal funding aimed at promoting affordable housing. Through programs facilitated by the Canada Mortgage and Housing Corporation (CMHC), developers receive incentives to include affordable units in their projects ^[5]. However, there have been allegations that some developers, including Wesgroup, have not fully delivered on these commitments, or have found ways to reclassify units to meet affordability criteria nominally ^[6].

Public Complaints About Municipal Fees

In addition to federal funding, Wesgroup has publicly criticized municipal charges such as Development Cost Charges (DCCs) and Community Amenity Contributions (CACs) ^[7]. The company’s leadership has expressed that these fees inflate the cost of development, which in turn impacts housing affordability. In a series of public statements and interviews, including appearances on platforms like YouTube, Wesgroup executives have advocated for a reduction in these charges ^[8].

While developers argue that high municipal fees hinder their ability to provide affordable housing, municipalities contend that these fees are essential for funding infrastructure and community services necessitated by new developments ^[9]. This tension highlights the complex interplay between private development interests and public policy objectives.

The Weight of Legal Might

Developers like Wesgroup wield significant legal power, often employing formidable legal teams adept at navigating the complexities of property law. The use of such “legal forces” can be described as aggressive or even “brutal” when viewed from the standpoint of small businesses lacking comparable resources ^[10]. These tenants, already strained financially, face an uphill battle when legal notices, demands, and proceedings begin to accumulate.

An example of this dynamic is seen in cases where small businesses faced eviction or legal action shortly after the expiration of CERS. With limited ability to negotiate or challenge these actions, many were forced to close or relocate, leading to job losses and economic hardship within local communities ^[11].

Barriers to Legal Recourse

Securing legal counsel presents its own challenges. The high cost of legal services places them beyond the reach of many small business owners ^[12]. Moreover, a phenomenon known as “conflict of interest” further complicates matters. Law firms may be reticent to represent tenants against developers like Wesgroup, fearing the loss of lucrative relationships with these deep-pocketed clients ^[13]. This dynamic leaves tenants with limited options, often navigating the legal labyrinth without guidance.

Industry Practices and Similar Cases

The experiences of small business tenants with developers are not isolated incidents but reflect a broader pattern within the industry. Across Canada, there have been reports of developers enforcing lease terms stringently post-subsidy, leading to evictions or unfavorable renegotiations ^[14]. In some cases, businesses that served their communities for decades were displaced to make way for new developments targeting higher-income tenants or purchasers.

Analyzing the Scale of the Issue

The scale of this issue is significant. Small businesses are the backbone of the Canadian economy, accounting for over 98% of all employer businesses and employing millions of Canadians ^[15]. The aggressive actions by large developers not only threaten individual businesses but also have ripple effects on employment, community cohesion, and the vibrancy of local economies.

The concentration of property ownership among large developers like Wesgroup amplifies their influence over market conditions and tenant relations. This concentration can lead to a homogenization of urban spaces, where unique local businesses are replaced by larger chains or luxury developments that may not serve the broader community’s needs ^[16].

Federal Funding and the Affordable Housing Paradox

Developers often receive substantial funding from the federal government to promote affordable housing initiatives ^[17]. The paradox arises when these same developers, after securing funds, publicly decry municipal charges such as DCCs and CACs. These charges are levied to fund infrastructure and amenities necessitated by new developments, ensuring that growth is sustainable and benefits the wider community.

For instance, Wesgroup’s President and CEO, Beau Jarvis, has appeared in interviews and public forums discussing the challenges of development costs and regulatory barriers ^[18]. While advocating for reduced fees to promote affordability, critics argue that this stance overlooks the responsibility developers have to contribute to the communities that facilitate their projects.

The Developer’s Perspective

It’s important to acknowledge the position of developers. They operate within a framework of regulations, market pressures, and financial risks. Complaints about DCCs and other municipal charges often stem from concerns about project viability and profitability ^[19]. Developers argue that excessive fees can delay projects, reduce the number of affordable units they can provide, and ultimately lead to higher costs for consumers.

The debate highlights a fundamental tension between private enterprise objectives and public interest obligations. Finding a balance between these interests is crucial for sustainable urban development that meets the needs of all stakeholders.

Towards Equitable Solutions

The challenges faced by small business tenants call for a reassessment of industry practices. Solutions may include policy interventions to provide legal aid to small businesses, reforms in commercial leasing laws to balance interests more fairly, and fostering a legal environment where representation is accessible regardless of a client’s financial standing ^[20].

Moreover, transparency in how federal funds are utilized by developers could ensure that the intended social benefits, such as affordable housing, are realized without undue contention over municipal charges. Establishing accountability measures and engaging community stakeholders in development decisions can also mitigate conflicts.

Conclusion

The narrative of small business tenants struggling under the weight of aggressive legal actions by developers like Wesgroup is a poignant reflection of broader societal imbalances. It is a clarion call for compassion, fairness, and the pursuit of justice. As we navigate the post-pandemic landscape, let us strive to ensure that prosperity and opportunity are not the exclusive province of the powerful but are shared equitably among all who contribute to the tapestry of our communities.

References

In the spirit of clarity and earnest discourse, this article seeks to illuminate the challenges at the intersection of small business resilience and developer practices. Echoing the eloquence and moral fortitude reminiscent of Lincoln’s prose, it underscores a collective responsibility to forge a path toward fairness and equity.