Under SB 1103, landlords leasing to Qualified Commercial Tenants must provide a translated copy of the lease if negotiations were conducted primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean without an interpreter. Landlords must also give advance written notice before any rent increase — 30 days for increases of 10% or less, or 90 days for larger increases — and cannot pass through certain operating expenses, such as maintenance costs unrelated to the tenant’s specific space, without properly itemized documentation. Churches and nonprofits leasing commercial property should review existing lease agreements to confirm they meet these updated disclosure and notice requirements.
Qualified Commercial Tenant
A “Qualified Commercial Tenant” is defined as a tenant of commercial real property that is a microenterprise (generally, a business with 5 or fewer employees that lacks sufficient access to loans, equity, or other financial capital); a restaurant with fewer than 10 employees; or a nonprofit organization with fewer than 20 employees.
Under SB 1103, landlords leasing to Qualified Commercial Tenants must provide a translated copy of the lease if negotiations were conducted primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean without an interpreter. Landlords must also give at least 90 days’ notice before any rent increase, and cannot pass through certain operating expenses, such as maintenance costs unrelated to the tenant’s specific space, without properly itemized documentation. Churches and nonprofits leasing commercial property should review existing lease agreements to confirm they meet these updated disclosure and notice requirements.
Rent Increases
- Landlords must provide qualified commercial tenants on week-to-week, month-to-month, or short-term leases with at least 30 days’ written notice for rent increases of 10% or less.
- For rent increases exceeding 10%, landlords must provide at least 90 days’ written notice.
- Rent increases are not effective until the applicable notice period has expired.
Building Operating Costs
- Landlords are prohibited from charging qualified commercial tenants fees to recover building operating costs unless specific conditions are met, including:
- Costs are allocated proportionately per tenant, by square footage, or another substantiated method.
- Landlords provide supporting documentation of the incurred or anticipated costs.
- Costs do not include expenses paid directly by a tenant to a third party or expenses reimbursed to the landlord by a third party, tenant, or insurance.
- Landlords cannot alter the method or formula used to allocate building operating costs in a way that increases the tenant’s share during the tenancy without proper notice and documentation.
Termination
- For month-to-month tenancies, landlords must provide a 60-day written notice to terminate the tenancy if the tenant has occupied the property for one year or more.
- If the tenant has occupied the property for less than one year, a 30-day written notice is required.
Enforcement and Penalties
Landlords who fail to comply with SB 1103’s disclosure and notice requirements may be subject to legal action from affected tenants, including claims for damages. Because these protections apply specifically to qualified commercial tenants meeting the microenterprise, restaurant, or nonprofit criteria outlined above, churches and religious organizations leasing commercial space should confirm their tenant status and keep documentation of any required disclosures on file.
Notes
- Prepare to offer lease translations when required and maintain transparency regarding building operating costs.
- Review and possibly amend existing lease agreements to ensure compliance with SB 1103.
- Implement procedures to provide timely notices for rent increases and terminations.
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Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax, or other professional services. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.
