Senate Bill 1103, which took effect on January 1, 2025, amends sections 827, 1632, 1946.1, and 1950.9 of the California Civil Code. This legislation grants new lease protections to “qualified commercial tenants.”
Under SB 1103, a commercial tenant is a “qualified commercial tenant” if:
- It is a “microenterprise” (i.e., has five or fewer full- or part-time employees, including the owner, and generally lacks sufficient access to capital), a restaurant with fewer than 10 employees, or a nonprofit organization with fewer than 20 employees; and
- Has provided to the landlord written notice of its “qualified commercial tenant” status and attestation about its number of employees within the previous 12 months (for periodic tenancies of a month or less) or upon lease execution and annually thereafter (for longer leases).
SB 1103 modifies Code section 827(a) to require landlords to give advance notice to “qualified commercial tenants” in periodic tenancies prior to raising rents. Specifically, it requires that:
- If landlords are raising rents by 10% or less, landlords must provide 30 days’ advance notice.
- If landlords are raising rents by more than 10%, landlords must give 90 days’ advance notice.
The landlord’s rent increase notice must reference section 827(a), but there are no civil penalties for the landlord’s failure to send such notice.
SB 1103’s modification to Code section 1632 applies to “qualified commercial tenants” who negotiate leases (including lease amendments) in Spanish, Chinese, Tagalog, Vietnamese, or Korean, without an interpreter. It requires landlords to give such tenants notice of this provision and a copy of the lease in the applicable language before execution. Otherwise, the tenant has a nonwaivable right to rescind the lease.
SB 1103’s modification to Code section 1950.9 relates to common area charges and may also not be waived. In addition to commonly negotiated lease provisions (such as excluding costs paid directly by the tenant to a third party or for which the landlord is otherwise reimbursed), the following rules apply:
- Common area charges must be allocated proportionately per tenant, by square footage, or another method for which the landlord gives the tenant “supporting documentation.”
- Landlords can only charge tenants for common area charges incurred in the past 18 months or which are expected over the next 12 months and for which the landlord has provided supporting documentation.
- The landlord must notify the tenant in writing (before lease execution) that the tenant has the right to inspect such documentation upon written request (which landlord must provide within 30 days after the tenant’s request).
- The landlord can’t alter the method used to allocate the tenant’s share of common area charges in a way that increases the tenant’s responsibility therefor unless the landlord first notifies the tenant of the same in writing with supporting documentation showing the basis of the increase.
If the landlord violates these rules, then:
- The tenant can use this violation as an affirmative defense against an eviction action based on the tenant’s failure to pay these costs.
- The tenant may be awarded actual damages, injunctive relief, and possibly attorneys’ fees.
- Upon a finding that the landlord acted willfully, or with “oppression, fraud, or malice,” the tenant may be entitled to treble and punitive damages.
SB 1103 modifies Code section 1946.1 to provide that periodic leases to “qualified commercial tenants” automatically renew unless either party terminates in writing. The landlord must give at least 60 days’ notice (or 30 days if the lease was for less than a year). The tenant must give notice at least for the term of the periodic tenancy, which notice must reference this Code section.
