Restrictions on Cost Allocation Adjustments:

The bill prohibits landlords from altering the method or formula used to allocate building operating costs in a way that increases the tenant’s share of those costs during the tenancy. This restriction significantly impacts a property owner's ability to manage unforeseen expenses. Here are some critical costs property owners would not be able to recoup due to this prohibition:

• Emergency Repairs: Costs for emergency repairs due to unforeseen incidents like electrical failures, structural damage, HVAC breakdowns, and damages caused by extreme weather.
• Insurance Premium Increases: Increased insurance premiums due to changes in risk assessment or after a claim (e.g., after a natural disaster or accident).
• Property Tax Increases: Unexpected increases in property taxes due to reassessment or changes in tax laws.
• Major Capital Improvements: Necessary major capital improvements or upgrades to the property, such as roof replacement, significant plumbing upgrades, or elevator repairs.
• Compliance with New Regulations: Costs incurred to comply with new safety, environmental, or accessibility regulations (such as ADA compliance upgrades, asbestos removal, and decarbonization efforts).
• Inflation Adjustments: General inflation-related increases in operating costs (e.g., utilities, maintenance services) that outpace the expected or documented amounts.
• Unforeseen Security Enhancements: Enhancements to security measures in response to increased crime rates or specific threats.

Legal Risks and Uncertainty:

• Rescission Rights: Allowing tenants to rescind leases at any time for non-compliance with translation requirements introduces significant legal uncertainties. Tenants could exploit minor translation errors to terminate leases, causing financial losses and disrupted tenancies. The provision lacks a time limit for rescission, leading to prolonged uncertainty for landlords.
• Affirmative Defense in Eviction: The bill allows tenants to use a landlord’s non-compliance with documentation requirements as an affirmative defense in eviction or possession actions. This introduces substantial legal risks, including potential financial penalties and attorney’s fees, which could lead to increased legal disputes and costs.

Increased Administrative Burden and Compliance Costs:

These top issues illustrate the significant financial, administrative, and legal burdens that SB 1103 would impose on landlords, particularly small property owners, potentially harming the commercial real estate market and the small businesses the bill aims to protect. 

RESOURCES

• Bill Text 
• Coalition Opposition Letter
  
  Questions? Contact CBPA Senior Director of Government Relations Skyler Wonnacott at swonnacott@cbpa.com.