By: Skyler E. Gray, Esq.
January 21, 2025
A new year brings with it new opportunity and, at least in California, new additions or revisions to the laws. Exciting stuff! Luckily for you, we will happily dredge through the plethora of changes to provide you, our audience, an update on the laws that are most pertinent to the field of real estate. So, stay tuned for further blog posts in our “new laws” series.
Today, we provide you with one important change involving the protections afforded to “qualified commercial tenants”.
The first question presented to us is what exactly is a qualified commercial tenant? Well, a “qualified commercial tenant” is now defined throughout the Civil Code as (i) a tenant of commercial real property, (ii) that is a microenterprise (generally a business with five or fewer employees), a restaurant with ten or fewer employees, or a nonprofit organization with fewer than twenty employees, and (iii) that has provided written notice to the landlord that the tenant is a qualified commercial tenant and a self-attestation regarding the number of employees, unless the tenancy is from week to week, month to month, or for a period less than a month.
To summarize this definition with less legalese, a “qualified commercial tenant” is a tenant leasing commercial property, with fewer than the above-listed number of employees, and that has notified the landlord of its protected status unless the tenancy is month-to-month (or a shorter period). Needless to say, this change will apply to a multitude of ongoing and future landlord-tenant relationships throughout the state of California.
With that in mind, we are now prepared for a quick dive into the legal protections afforded to the qualified commercial tenant.
Notice to Increase Rent
The law now affords qualified commercial tenants, in certain circumstances, with increased protections related to rent increases.
Specifically, qualified commercial tenants are provided with lengthened notice periods if the lease is for a month-to-month (or shorter period). If so, any rent increase of 10% or less requires a 30-day notice to the tenant, while any rent increase of more than 10% require a 90-day notice.
Moreover, with regard to all qualified commercial tenants, the rent increase can never take effect until the end of the pertinent notice period. Importantly, landlords of commercial real property are also required to provide additional statutory information within all notices to increase rent.
Translated Copy of Agreement
The law now affords qualified commercial tenants, in certain circumstances, with increased protections related to agreements negotiated in other languages.
Specifically, for qualified commercial tenants, a translated copy of the lease or rental agreement must be delivered to the tenant before signing if (i) the contract was negotiated primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean, and (ii) the agreement relates to a non-residential zoned commercial space.
Importantly, if the landlord violates this law, the qualified commercial tenant may rescind the contract.
Presumption of Month-to-Month Renewal
The law now affords qualified commercial tenants, in certain circumstances, with increased protections even after the lease agreement expires.
Specifically, after expiration of the lease or rental agreement, qualified commercial tenancies are presumed to be renewed on a month-to-month basis if (i) the tenant stays in possession of the leased space following expiration of the lease, and (ii) the landlord accepts monthly rent payment from the tenant.
Notice to Terminate Tenancy
The law now affords qualified commercial tenants, in certain circumstances, with increased protections relating to a notice to terminate tenancy.
Specifically, qualified commercial tenants are provided with lengthened notice periods if (i) the lease is for a month-to-month (or shorter period), and (ii) the termination of the lease is without fault. If these requirements are met, a 30-day notice (at a minimum) to terminate tenancy is required if the tenant has occupied the space for less than a year. On the other hand, if the qualified commercial tenant has occupied the space for more than a year, a 60-day notice (at a minimum) to terminate tenancy is required.
Building Operating Costs
The law now affords qualified commercial tenants with increased protections relating to building operating costs.
Specifically, a qualified commercial tenant shall not be charged a fee related to building operating costs unless the costs are allocated proportionately per tenant, and the qualified commercial tenant is provided statutorily required documentation (along with several other conditions that must be met).
Importantly, a violation of this provision may result in the qualified commercial tenant obtaining an affirmative defense to any action by the landlord to recover possession based on a failure to pay the building operating cost, and may make the landlord liable to the tenant for specified damages.
Conclusion
The purpose of this blog was to introduce our audience to the concept of qualified commercial tenants. If you suspect that your business is a qualified commercial tenant (or your tenant’s business entity is a qualified commercial tenant), we recommend you speak to a qualified legal professional.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.
