1. DEFINITIONS:
“Commercial Real Property” means all real property in the State of California, except dwelling units and motor homes.
“Microenterprise” means a sole proprietorship, partnership, limited liability company, or corporation that meets both of the following requirements: (1) Has five or fewer employees, including the owner, who may be part time or full time; AND (2) generally lacks sufficient access to loans, equity, or other financial capital.
“Nonprofit Organization” means any private, nonprofit organization that qualifies under Section 501(c)(3) of the United States Internal Revenue Code of 1986.
“Qualified Commercial Tenant (‘QCT’)” means a tenant of commercial real property that meets both of the following requirements:
(i) The tenant is a microenterprise, a restaurant with fewer than 10 employees, or a nonprofit organization with fewer than 20 employees; AND
(ii) The tenant has provided the landlord, within the previous 12 months, a written notice that the tenant is a Qualified Commercial Tenant and provided a self-attestation regarding the number of employees, at such time the protections under this subdivision come into play. The effective date is January 1, 2025. This is to be done “before” execution of the lease and annually thereafter.
2. TRANSLATION REQUIREMENTS: Note: The translation requirements pertain to QCT tenants only.
1. Effective January 1, 2025, a person (landlord, manager, broker, agent) who negotiates primarily in Spanish, Chinese, Tagalog, Vietnamese or Korean, in the course of entering into specified agreements, shall deliver to the other party a translation of the contract or agreement . . . in the language in which it was negotiated that includes a translation of every term and condition in that contract or agreement. A person may rescind an agreement if that agreement does not comply with that translation requirement.
Effective date: January 1, 2025
2. This includes any subsequent document making substantial changes in the rights and obligations of the parties.
3. The following elements of the English language contract may be retained and not translated: names and titles of individuals and other persons, addresses, brand names, trade names, trademarks, registered service marks, full or abbreviated designations of the make and model of goods or services, alphanumeric codes, numerals, dollar amounts expressed in numerals and dates and individual words or expressions having no generally accepted non-English translation.
4. The “interpreter exemption” that relates to residential leases does NOT apply here. If the tenant uses his/her own interpreter, there is no exemption. The lease still needs to be presented in the language used during negotiations.
5. Any waiver of a provision of this section is contrary to public policy and is void and unenforceable.
Note: Translation Notice Must Be Posted:
A notice, in any of the languages specified (Spanish, Chinese, Tagalog, Vietnamese or Korean) shall be conspicuously displayed in the office where the agreement was negotiated that includes all of the requirements.
2. TRIPLE NET CHARGES IN LEASES: Note: The Triple Net Charges language pertains to QCT tenants only.
A landlord of a commercial real property shall not charge a QCT a fee to recover building operating costs unless all of the following apply:
(1) The building operating costs are allocated proportionately per tenant, by square footage, or another method as substantiated through supporting documentation provided by the landlord to the QCT and
(2) The building operating costs have been incurred within the previous18 months, or are reasonably expected to be incurred within the next 12 months based on reasonable estimates; and
(3) Before the execution of the lease, the landlord provides the prospective QCT a paper or electronic notice stating that the tenant may inspect any supporting documentation of building operating costs upon written request; and
(4) Within 30 days of a written request, the landlord provides the QCT supporting documentation of the previously incurred or reasonably expected building operating costs; and
(5) The costs do not include expenses paid by a tenant directly to a third party; and
(6) The costs do not include expenses for which a third party, tenant, or insurance reimbursed the landlord.
Notes Regarding Triple Net Charges:
a. A landlord of commercial real property shall not charge a fee to recover any building operating costs from the QCT until the landlord provides the QCT supporting documentation.
b. A violation of this section provides for substantial penalties including punitive damages.
c. Any waiver of a provision of this section is contrary to public policy and is void and unenforceable.
Documentation Requirements for Triple Net Charges:
“Supporting Documentation” means a dated and itemized quote, contract, receipt, or invoice from a licensed contractor or a provider of services that includes, but is not limited to, both of the following:
(A) A tabulation showing how the costs are allocated among tenants in compliance with paragraph (1) of subdivision (a); AND
(B) A signed and dated attestation by the landlord that the documentation and costs are true and correct.
Notes Re Timing:
These Triple Net Requirement shall apply to: Leases executed or tenancies commenced or renewed on or after January 1, 2025; and leases executed or tenancies commenced before January 1, 2025, that do not contain a provision regarding building operating costs.
3. RENT INCREASES FOR COMMERCIAL TENANTS:
If the rent increase is 10% or less of the rent charged during any month during the prior 12 months, an increase may be put into effect thirty (30) days after written notice. The notice must include the requirements of this section.
If the rent increase exceeds 10% of the rent charged during any month during the prior 12 months, an increase may be put into effect ninety (90) days after written notice. The notice must include the requirements of this section.
Note: Rent increase notice must include definitive language from this bill “on the notice.”
4. TERMINATION OF MONTH-TO-MONTH TENANCIES:
For any QCT, a landlord must give a minimum of sixty (60) days notice of termination of the QCT’s tenancy. The termination notice must include the language from this bill on the notice.
ADDITIONAL COMMENTS:
First, we would like to thank California Business Properties Association (“CBPA”) and, especially our lobbyist, Skylar Wonnacott, for their hard work in negotiating out the worst parts of this bill. While no one likes the bill as passed, it was much worse before CBPA and Skylar worked their magic.
Second, the author of this bill, Senator Menjivar, has made it very clear that he is “not” done and will continue to introduce legislation to regulate commercial leases. CBPA will continue to lobby to protect the industry.
Richard L. Seide; Ellen L. Ticknor
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