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OPPOSE SENATE BILL 1103

Commercial Lease Mandates Bill Disastrous for California’s Small Businesses

CBPA is advocating against Senate Bill 1103 (Menjivar; D – Van Nuys), which would disrupt the commercial leasing landscape by imposing requirements detrimental to both property owners and the small businesses and nonprofits this bill aims to protect.

ABOUT SB 1103

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:

  • Detailed Documentation Requirements: The bill requires landlords to provide detailed, itemized, and dated documentation of building operating costs within 30 days of a tenant's written request. This requirement is administratively burdensome and costly, especially for small property owners who may lack the resources to maintain extensive records.
  • Translation Requirements: The translation requirements for commercial leases negotiated in non-English languages impose substantial costs, as accurate translations of technical legal documents can start around $10,000. Errors in translation could lead to legal disputes, further complicating compliance.

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. 

Current Status: Passed the Senate with a vote of 22-10. The bill is expected to be voted on by the Assembly in early August. CBPA is working on another set of amendments in an attempt to improve the bill. 

RESOURCES


CALL TO ACTION

Contact your assemblymembers to urge their opposition to SB 1103. 

SAMPLE MESSAGE

Dear Assemblymember  __________________,

Senate Bill 1103 (Menjivar; D-Van Nuys) would disrupt the commercial leasing landscape by imposing requirements detrimental to both property owners and the small businesses and nonprofits this bill aims to protect. The bill fails to address fundamental issues previously highlighted by the commercial real estate coalition and introduces additional complexities that could adversely impact the commercial real estate market and the small businesses the bill aims to protect.

SB 1103 would restrict cost allocation adjustments, significantly impacting a property owner's ability to manage unforeseen expenses. This bill would lead to increased legal risks, uncertainty, administrative burdens, and costs due to the documentation and translation requirements.

SB 1103 threatens the operational flexibility and financial viability of property owners and small businesses in California. We urge you to vote no on SB 1103.

Sincerely,

Insert your name/organization


Protecting commercial real estate for over 50 years

Office: (916) 443-4676

Address:

1121 L Street, Suite 501
Sacramento, CA 95814

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