California SB 1103: What Commercial Tenants Need to Know

California SB 1103, effective January 1, 2025, created the first statutory documentation rights for certain small commercial tenants related to building operating costs. For qualifying tenants, the law creates a 30-day deadline for landlords to respond to written requests for operating cost records, prohibits charging operating cost fees before documentation is provided, and creates affirmative defenses and damages remedies when landlords fail to comply.

This is a significant departure from the default rule in California commercial leasing, where operating cost transparency — including CAM audit rights — depends entirely on what the lease says. SB 1103's protections exist independent of the lease.

The law does not cover all commercial tenants. Understanding who qualifies and what the statute actually requires is the starting point.

Who qualifies: the "qualified commercial tenant" definition

SB 1103's operating cost protections apply only to "qualified commercial tenants" (QCTs) as defined in California Civil Code § 1950.9. A tenant qualifies as a QCT if they meet one of three size criteria and provide the landlord with written notice of their QCT status:

The size criteria (meet one):

• A microenterprise (as defined under California law: typically a business with 5 or fewer employees, including the owner)
• A restaurant with fewer than 10 employees
• A nonprofit organization with fewer than 20 employees

The notice requirement: The tenant must provide the landlord a written self-attestation of QCT status within the prior 12 months (and annually thereafter, and upon lease execution or renewal).

Notably, the statute does not use square footage or rental rate as qualifying criteria. Premises size is not a factor in determining QCT status, according to practitioner analysis of the statute's framework.

If you are a qualifying small business, restaurant, or nonprofit that has not provided this attestation, you are not receiving the statute's protections even though you might otherwise qualify. The notice requirement is not automatic.

What Civil Code § 1950.9 requires

For QCTs, California Civil Code § 1950.9 creates the following specific requirements:

Cal. Civ. Code § 1950.9: A landlord may not charge a qualified commercial tenant a fee to recover "building operating costs" unless the conditions specified in this section are met.

Proportionate allocation: The fee must be based on proportionate allocation, not arbitrary amounts.

Timing: Costs included in the fee must have been incurred within the previous 18 months or reasonably expected within the next 12 months.

Pre-execution notice: Before the lease is executed, the landlord must notify the QCT that costs may be inspected.

30-day documentation deadline: Landlord must provide supporting documentation within 30 days of a QCT's written request.

No charge until documentation is provided: A landlord may not charge the fee until the supporting documentation is provided.

No unilateral formula changes: The landlord may not change the allocation method or formula in a way that increases the QCT's share without providing written notice and supporting documentation explaining the basis for the change.

The CAM audit significance

For qualifying tenants, § 1950.9 functions as a statutory CAM audit right — but one tied to the broader concept of "building operating costs," not specifically to the CAM label in the lease. The practical effect:

• If your landlord is billing you for operating costs and you are a QCT, you can send a written request for supporting documentation.
• The landlord has 30 days to respond.
• If they don't respond or refuse to provide documentation, they are in violation of § 1950.9.
• You may withhold payment of the fee as an affirmative defense in any action to collect it.

This is materially stronger than the typical negotiated audit rights clause, which usually requires the tenant to initiate an audit (not just request documentation) and allows 30–60 days for the landlord to schedule a records inspection. The statutory right is simpler: request documentation, wait 30 days.

The statute's limitation: it applies to "building operating costs" as a pass-through fee structure. If your lease structures CAM differently — for example, as a rent component rather than a separately billed fee — the analysis under § 1950.9 may differ. California courts have not yet developed extensive case law interpreting the scope of "building operating costs" under the new statute.

Other SB 1103 protections relevant to small commercial tenants

While § 1950.9 is the most directly CAM-relevant protection, SB 1103 also enacted or expanded several other protections:

Civil Code § 827 — Rent increase notice: For QCTs in periodic tenancies (month-to-month), the statute requires 30-day advance written notice for increases up to 10%, and 90-day notice for increases greater than 10%. The increase is not effective until the notice period expires.

Civil Code § 1632 — Lease translation: Commercial tenancy agreements with QCTs entered into on or after January 1, 2025 are subject to translation requirements for Spanish, Chinese, Tagalog, Vietnamese, and Korean-speaking tenants. If the lease negotiation was conducted primarily in one of those languages, the landlord must provide a translation before signing.

Civil Code § 1946.1 — Termination notice: QCTs in periodic tenancies are entitled to 60 days' notice of lease termination (or 30 days if they have occupied the premises less than a year).

These are secondary to the operating cost documentation right for CAM purposes but represent meaningful baseline protections that didn't exist for California commercial tenants before 2025.

Remedies under § 1950.9

Section 1950.9 creates multiple enforcement mechanisms:

Affirmative defense: In any possession action based on nonpayment of the operating cost fee, the QCT's inability to verify the charges (due to the landlord's failure to provide documentation) is an affirmative defense. You don't have to pay a fee you can't verify.

Civil liability: If the landlord violates § 1950.9, the QCT may recover actual damages.

Attorneys' fees and costs: The court has discretion to award attorneys' fees and costs to a prevailing QCT.

Treble and punitive damages: If the violation was willful, oppressive, fraudulent, or malicious, treble damages and punitive damages are available.

Injunctive relief: The public also has a right to seek injunctive relief against violations.

These remedies are significantly stronger than the typical contractual remedy for a CAM dispute, which usually involves recovering only the overcharge amount. The availability of treble damages for willful violations creates a real compliance incentive for landlords.

California's SOL for commercial lease claims

For CAM overcharge claims not covered by § 1950.9 (for example, by tenants who don't qualify as QCTs, or for periods before January 1, 2025), California's breach-of-written-contract statute of limitations applies: four years under California Code of Civil Procedure § 337.

The limitations period generally runs from when the overcharge accrued — typically when the landlord issued the reconciliation statement that contained the improper charge, and the tenant had the information needed to recognize the dispute.

Practical steps for California small business tenants

1. Determine if you qualify as a QCT. Review the microenterprise, restaurant, and nonprofit definitions under California law.

2. Send written attestation of QCT status to your landlord. This is the trigger for § 1950.9's protections and does not require any specific form — a simple letter with your self-attestation is sufficient.

3. If you receive a CAM or operating cost charge you cannot verify, send a written documentation request. The landlord has 30 days to respond.

4. If the landlord fails to respond within 30 days, withhold payment with notice citing § 1950.9. Consult California commercial real estate counsel before taking this step.

5. Review your lease for the CAM provisions generally. Even with § 1950.9's protections, your lease terms govern allocation methods, exclusions, and audit rights for non-QCTs and for historical periods before 2025.

Frequently Asked Questions

Does SB 1103 apply to leases signed before January 1, 2025?

The statute specifies that § 1950.9 applies to leases executed or tenancies commenced or renewed on or after January 1, 2025, and to certain older leases that do not contain a building operating costs provision. For leases signed before 2025 that contain CAM provisions, the statute's scope is more limited. Consult qualified California commercial real estate counsel for analysis of a specific lease situation.

What is a "microenterprise" under California law?

California's microenterprise definition typically refers to businesses with 5 or fewer employees, including the owner. The specific statutory definition should be confirmed against current California Small Business Development Act provisions, as the definition may be cross-referenced.

If I qualify as a QCT, do my lease audit rights still matter?

Yes. The statutory right under § 1950.9 and your contractual audit rights (if any) coexist. The statute creates a documentation request right with a 30-day response deadline. A lease audit rights clause (if present) may provide broader access to records than the documentation request mechanism. For tenants with strong lease audit rights and QCT status, both mechanisms are available.

Does the translation requirement under § 1632 apply to lease amendments and renewals?

SB 1103 applies the § 1632 translation requirement to tenancy agreements entered into on or after January 1, 2025. The scope as applied to amendments and renewals may depend on how the amendment is structured — whether it replaces the original lease or modifies it. This is an area where qualified California counsel should advise before signing.

What if my landlord claims my business doesn't qualify as a QCT?

The self-attestation notice is the initial step, but if the landlord disputes your QCT status, that dispute would need to be resolved under California law. The statute places the attestation burden on the tenant and requires annual renewal of the notice. Maintaining records of your attestation letters is advisable.

Related reading:

• The Commercial Tenant's Guide to CAM Lease Language — complete provision-by-provision guide
• Texas Commercial Tenant Rights: CAM Audit Statute of Limitations
• New York Commercial Lease CAM Dispute Protections
• CAM Exclusions Every Commercial Lease Should Have
• Understanding CAM Dispute Rights — multi-state dispute guide