Since Jan. 1, 2025, very small businesses, small restaurants and small nonprofits that self-certify get residential-style notice rules, documented operating-cost charges and translated leases. Here is how the law works, where it is unclear and what Kern landlords and tenants should do.
SB 1103 commercial tenant protections are California rules, signed Sept. 30, 2024 (Chapter 1015) and effective Jan. 1, 2025, for “qualified commercial tenants”: microenterprises, restaurants with fewer than 10 employees and nonprofits with fewer than 20. After the tenant self-certifies, landlords must document operating-cost charges, give 30 to 90 days’ notice of rent increases on periodic tenancies and translate certain leases.
SB 1103 at a glance
| Item | Detail |
|---|---|
| Law | Senate Bill 1103 (Menjivar), Chapter 1015, Statutes of 2024 |
| Signed | Sept. 30, 2024, by Gov. Gavin Newsom |
| Effective | Jan. 1, 2025 |
| Code sections | Civil Code 827 (rent increases), 1632 (translation), 1946.1 (termination notice), new 1950.9 (building operating costs) |
| Who is protected | Microenterprises (5 or fewer employees, including the owner), restaurants with fewer than 10 employees, 501(c)(3) nonprofits with fewer than 20 employees, after written notice and self-attestation |
| Who enforces | The tenant (civil action, eviction defense, rescission); the district attorney, city attorney or county counsel (injunctions) |
| Key requirement | Operating-cost charges must be proportionate, recent and backed by itemized documentation; waivers are void |
| Status | In force; no amendments found in the 2025 code or 2026 session; no published appellate decisions found |
| What to watch | Litigation over the self-attestation rules, the 18-month cost window and pre-2025 leases |
Key takeaways
- SB 1103 (Chapter 1015, Statutes of 2024) took effect Jan. 1, 2025. It protects only microenterprises, restaurants with fewer than 10 employees and nonprofits with fewer than 20 that have given the landlord a written notice and employee self-attestation.
- Under Civil Code 1950.9, operating costs billed to a qualified commercial tenant must be allocated proportionately, incurred within the previous 18 months (or expected within 12) and backed by itemized documentation.
- On month-to-month tenancies, a qualified commercial tenant gets 30 days’ notice of a rent increase of 10% or less, 90 days’ notice of a larger one and 60 days’ notice of termination after a year of occupancy.
- A willful violation of the operating-cost rules can cost a landlord three times actual damages plus punitive damages, and a lease waiver of those rights is void.
What is SB 1103 and why did California pass it?
Senate Bill 1103, authored by Sen. Caroline Menjivar, was approved by the governor and filed with the Secretary of State on Sept. 30, 2024, as Chapter 1015, Statutes of 2024. It gives a protected class of small commercial tenants some of the notice and disclosure rules that residential tenants already have.
Supporters told the Legislature that building operating costs for small tenants can be “significant, unpredictable, inconsistent, and unsubstantiated,” according to the Assembly floor analysis dated Aug. 22, 2024. In the same analysis the author said small businesses and nonprofits are “a vital resource for many in my district and across California.”
Business and property groups, including the California Chamber of Commerce and the California Business Properties Association, opposed the bill. The analysis summarizes their argument: it fails to distinguish small landlords from large ones and extends residential-style notice rules to commercial leases regardless of bargaining power.
Who is a qualified commercial tenant under SB 1103?
Every protection turns on one defined term. A “qualified commercial tenant” must be a covered type of business and must have told the landlord so in writing. The same definition appears in each amended section, including Civil Code 1950.9(h)(5).
The two-part qualified commercial tenant test
| Test | What the statute says | Practical notes |
|---|---|---|
| 1. Type of tenant | A microenterprise, a restaurant with fewer than 10 employees, or a nonprofit with fewer than 20 employees | Nonprofit means a 501(c)(3) organization. “Restaurant” and “employee” are not further defined. |
| Microenterprise | Business and Professions Code 18000(a): a sole proprietorship, partnership, LLC or corporation with five or fewer employees, including the owner (part time or full time), that generally lacks sufficient access to loans, equity or other financial capital | The capital-access prong is subjective and is attested by the tenant, not verified by the landlord. |
| 2a. Notice (periodic tenancy) | Written notice that the tenant is a qualified commercial tenant, plus a self-attestation of its employee count, given within the previous 12 months | Applies to week-to-week, month-to-month and shorter tenancies, including many holdovers. |
| 2b. Notice (fixed-term lease) | The notice and self-attestation must be given before or upon execution of the lease, and annually thereafter | Protections apply from the time the notice is given. |
The microenterprise test comes from Business and Professions Code 18000, which requires both the small headcount and a general lack of access to capital. A five-person machine shop with a bank line of credit may not qualify.
The statute does not prescribe a form. AIR CRE, publisher of widely used California commercial lease forms, said at a January 2025 town hall: “We are not creating self-attestation forms because currently the statute does not prescribe a form.” Legal aid group Public Counsel published a sample notice and recommends delivery by a method that proves receipt.
One ambiguity matters for month-to-month tenants. Law firm Allen Matkins notes that the drafting leaves open whether periodic tenants must give any notice or self-attestation at all. Until a court decides, the safer course is for the tenant to give it.
What do SB 1103 commercial tenant protections require?
The bill changes four Civil Code sections. The table summarizes each rule and remedy, and the subsections give the mechanics.
SB 1103 requirements by code section
| Rule | Code section | What the landlord must do | Tenant remedy |
|---|---|---|---|
| Operating-cost pass-throughs | Civil Code 1950.9 (new) | Allocate proportionately, charge only costs from the prior 18 months or expected in the next 12, give a pre-lease inspection notice, produce documentation within 30 days of a written request | Actual damages, discretionary attorney fees, treble and punitive damages if willful; affirmative defense to eviction for unpaid costs |
| Rent increases (periodic tenancies) | Civil Code 827(b) | 30 days’ notice for increases of 10% or less in 12 months; 90 days for more than 10%; notice must describe the rule | Increase is not effective until the notice period expires; no civil penalties |
| Termination (periodic tenancies) | Civil Code 1946.1 | 60 days’ notice, or 30 days if the tenant has occupied less than one year | A short notice does not end the tenancy |
| Lease translation | Civil Code 1632(b)(8) | Deliver a translation before signing if the lease was negotiated primarily in Spanish, Chinese, Tagalog, Vietnamese or Korean | Tenant may rescind; the tenant’s own interpreter does not excuse the duty |
Building operating costs (Civil Code 1950.9)
Under subdivision (a), a landlord may not charge a qualified commercial tenant for building operating costs unless all of these conditions are met:
- Costs are allocated proportionately, by square footage or another documented method.
- They were incurred within the previous 18 months or are reasonably expected within 12.
- Before signing, the landlord gives notice that the tenant may inspect supporting documentation.
- The landlord produces that documentation within 30 days of a written request.
- The charge excludes costs the tenant paid directly to a third party or that a third party, a tenant or an insurer reimbursed.
“Building operating costs” include common-area maintenance, utilities that are not separately metered, and taxes or assessments charged to the landlord as owner. “Supporting documentation” is a dated, itemized quote, contract, receipt or invoice from a licensed contractor or service provider, plus an allocation tabulation and a signed, dated landlord attestation that it is true and correct.
Under subdivision (b), no operating-cost fee may be charged until the landlord provides supporting documentation. Under subdivision (c), the landlord may not change its allocation formula to raise the tenant’s share without written notice and documentation. Property and business improvement district assessments (Streets and Highways Code 36600 and following) are excluded. Our guides to operating expense pass-throughs and CAM reconciliations explain the underlying charges.
- The rules apply to leases signed, and tenancies started or renewed, on or after Jan. 1, 2025.
- They apply to all week-to-week and month-to-month tenancies.
- They apply to leases signed before Jan. 1, 2025, only if those leases contain no building operating cost provision.
Rent increase notices (Civil Code 827)
For a qualified commercial tenant on a week-to-week, month-to-month or shorter tenancy, amended Civil Code 827(b) requires written notice, delivered personally or by mail under Code of Civil Procedure 1013. The notice must come at least 30 days before an increase of 10% or less (counting all increases in the prior 12 months) and at least 90 days before a larger one. Mailing adds the CCP 1013 extension.
The notice must describe these rules, and the increase is not effective until the notice period has run. A violation does not entitle the tenant to civil penalties. Scheduled bumps in a fixed-term lease generally follow the lease, although law firm Carlton Fields flags uncertainty about how far the notice rules reach.
Termination notices (Civil Code 1946.1)
To end a qualified commercial tenant’s periodic tenancy, an owner must give at least 60 days’ written notice, or 30 days if the tenant has occupied the property less than one year. Other month-to-month commercial tenants still get the general 30-day rule.
Lease translations (Civil Code 1632)
Civil Code 1632(b) already required businesses that negotiate certain consumer contracts primarily in Spanish, Chinese, Tagalog, Vietnamese or Korean to deliver a translation before signing. SB 1103 added paragraph (b)(8), which covers leases and other tenancy agreements for nonresidential-zoned space entered into with a qualified commercial tenant on or after Jan. 1, 2025. The own-interpreter exception does not apply, and only the tenant may rescind.
Which tenants and leases are not covered?
SB 1103 is narrow. A warehouse user with 25 employees, a restaurant with 12 or a nonprofit with 30 is outside the law no matter how small its space. So is any business that has not delivered the notice.
- Tenants that exceed the employee thresholds, or microenterprises with adequate access to capital.
- Fixed-term leases signed before Jan. 1, 2025, that already contain an operating-cost provision (for the Civil Code 1950.9 rules).
- Property and business improvement district assessments.
- Rent schedules in fixed-term leases, which remain a matter of contract. See NNN, modified gross and full service leases for how those structures differ.
- Residential tenancies, which have their own rules.
The law relies on the tenant’s own attestation and gives the landlord no right to audit headcount. Landlords should still ask in writing and keep the answer in the lease file.
What are the penalties for violating SB 1103?
Under Civil Code 1950.9(d) to (g), a tenant sued for possession over unpaid operating costs may raise the violation as an affirmative defense. The tenant may also sue for actual damages, discretionary attorney’s fees and, for willful conduct, oppression, fraud or malice, treble and punitive damages.
The district attorney, city attorney or county counsel where the property sits may also seek an injunction. In Kern County that includes the Kern County District Attorney and the Bakersfield City Attorney. A waiver of the operating-cost rights is void, so a lease clause cannot contract around them. For eviction timelines, see our guide to California commercial eviction.
How does SB 1103 play out in Kern County and Bakersfield?
The U.S. Census Bureau counts 59,790 nonemployer establishments in Kern County (2024) against 14,352 employer establishments (2023), according to its QuickFacts page. Many of those very small firms rent shop space, small-bay units and flex suites.
Retail shop space is home to many small tenants. A Q2 2026 regional brokerage report on Bakersfield retail put vacancy at 5.20%, down from 5.50% in Q1, with an average NNN asking rate of $20.26 per square foot per year and activity concentrated among smaller-format users.
Small-bay industrial matters too. A Q2 2026 Bakersfield industrial report from a regional brokerage shows 9.55% vacancy and an average NNN asking rate of $10.05 per square foot. The report does not state a period; this article treats it as annual (about $0.84 per SF per month). Small contractors, fabricators and repair shops in small-bay units can meet the microenterprise test, and many run month-to-month after their term ends.
Translation is a real issue locally. The Census Bureau reports that 45.7% of Kern County residents age 5 and older speak a language other than English at home (2020 to 2024). A lease negotiated primarily in Spanish with a qualified tenant needs a Spanish translation delivered before signing.
What does SB 1103 mean for landlords, tenants, buyers and lenders?
Landlords and property managers
Documentation is the operational challenge. Costs without a vendor invoice, such as in-house labor or a percentage management fee, may be hard to support. Older costs are a second trap: Carlton Fields flags uncertainty over whether the 18-month window limits catch-up reconciliations.
For leases signed before 2025, law firm Cox Castle notes that the statute is unclear about how much detail a lease’s operating-cost provision needs to avoid coverage. It also offers no way to cure a missing pre-signing inspection notice. A standard SB 1103 notice in every lease package is a sensible default.
Tenants
The tenant controls whether the law applies. Deliver the notice and self-attestation before signing and each year, with proof of delivery. Request cost documentation in writing so the 30-day clock starts.
Buyers and lenders
For buyers, the key diligence points are which tenants have delivered notices and whether reconciliations were documented. A Prop 13 reassessment after a sale raises the property tax passed through as an operating cost, and for qualified tenants that increase needs the tax bill and a proper allocation. Lenders should treat undocumented recoveries from small tenants as at risk.
Has SB 1103 changed since 2025, and what should you watch?
We found no amendment to the SB 1103 sections. The 2025 code on Justia shows Civil Code 1950.9 as added by Chapter 1015, Statutes of 2024, with no later amendment. We also found no 2026 legislation that changes these rules, and no published appellate decision.
Open questions include whether periodic tenants must self-certify, how the 18-month window applies to reconciliations, what counts as a restaurant or an employee and how to treat pre-2025 leases. They will likely surface first as eviction defenses.
SB 1103 compliance checklist for Kern County landlords and tenants
- Landlords: add a written SB 1103 notice to every lease package stating that the tenant may inspect operating-cost documentation on written request.
- Landlords: ask each tenant in writing whether it claims qualified status, and calendar annual attestations.
- Landlords: keep invoices, tax bills, the allocation tabulation and a signed attestation for each cost category.
- Landlords: for month-to-month qualified tenants, use 30 or 90 days for rent increases and 60 days for termination, and describe the rules in the notice.
- Landlords: if a lease is negotiated mostly in Spanish or another listed language, deliver a full translation before signing.
- Tenants: give the notice and employee self-attestation before signing and every year, with proof of delivery.
- Tenants: request documentation in writing before paying a disputed reconciliation.
Worked example: a month-to-month tenant in a Bakersfield small-bay building
Assume a 12,000 square foot, six-unit small-bay building in Bakersfield. A four-person cabinet shop occupies a 2,000 square foot unit on a month-to-month holdover at $1,400 a month. It gave the landlord a written qualified commercial tenant notice and employee self-attestation in March 2026. All figures are hypothetical.
The landlord wants to raise rent to $1,575 (12.5%) and bill the tenant’s share of costs. Because the increase is over 10%, it needs 90 days’ written notice that describes the rule. The tenant’s square-footage share is 16.67%, but only costs that meet the 18-month and documentation rules can be billed.
What can be billed to the qualified tenant
| Cost item | Building total | Tenant share (16.67%) | Billable under Civil Code 1950.9? |
|---|---|---|---|
| 2025-26 property tax (tax bill on file) | $14,400 | $2,400 | Yes, if documented and allocated |
| Parking lot sweeping (vendor invoices, last 12 months) | $3,600 | $600 | Yes |
| Roof repair paid 20 months ago | $18,000 | $3,000 | No, outside the 18-month window |
| Fire sprinkler repair reimbursed by insurance | $6,000 | $1,000 | No, reimbursed by insurance |
| Electricity the tenant pays directly to PG&E | n/a | n/a | No, paid directly to a third party |
The landlord can bill $3,000 of the $7,000 it might otherwise allocate, and only after delivering documentation.
Frequently asked questions
What is a qualified commercial tenant in California?
It is a microenterprise (five or fewer employees including the owner, with limited access to capital), a restaurant with fewer than 10 employees or a 501(c)(3) nonprofit with fewer than 20. The tenant must also give the landlord written notice of its status and a self-attestation of its employee count. For a fixed-term lease, that happens before signing and then every year.
Does SB 1103 apply to industrial tenants?
Only if the industrial tenant meets the size test and gives the required notice. A small fabricator or repair shop with five or fewer people, owner included, that generally lacks access to loans or equity can qualify as a microenterprise. Most warehouse and distribution users have more employees and fall outside the law.
How much notice must a California commercial landlord give for a rent increase?
For a qualified tenant on a month-to-month or other periodic tenancy, Civil Code 827 requires at least 30 days’ written notice for an increase of 10% or less over 12 months. A larger increase needs 90 days, plus extra days if mailed. The notice must describe these rules. Increases in a fixed-term lease generally follow the lease schedule.
Can a landlord still charge CAM to a small tenant under SB 1103?
Yes. The law does not ban common area maintenance or other operating-cost charges. It requires charges to a qualified tenant to be allocated proportionately and to cover costs from the previous 18 months or expected within 12. Reimbursed or directly paid costs must be excluded, and itemized documentation must come first.
Can a commercial lease waive SB 1103 protections?
Not the operating-cost protections. Civil Code 1950.9(g) voids any waiver of those rights by a qualified commercial tenant as against public policy. The notice periods and translation duty also apply by statute. A tenant can, however, choose not to deliver the notice that triggers coverage.
What happens if a landlord violates SB 1103?
For operating-cost violations, the tenant can raise the violation as a defense in an eviction for unpaid costs. The tenant can also sue for actual damages, with attorney’s fees at the court’s discretion, and for treble and punitive damages if the conduct was willful. A short-noticed rent increase does not take effect until the notice period runs, and a tenant may rescind an untranslated lease.
Which languages require a translated commercial lease in California?
Civil Code 1632 lists Spanish, Chinese, Tagalog, Vietnamese and Korean. Since Jan. 1, 2025, a landlord must deliver a translation before signing when a lease for nonresidential-zoned space with a qualified tenant was negotiated primarily in one of those languages. The exception for a tenant who brings its own interpreter does not apply.
Has SB 1103 been amended in 2025 or 2026?
We found no amendments. The 2025 published code shows Civil Code 1950.9 as enacted by Chapter 1015 of 2024, and we found no 2026 legislation that changes the qualified commercial tenant rules. We also found no published appellate decision, so the drafting ambiguities remain open.
If you own or lease small-bay industrial, flex or shop space in Kern County and want to review how SB 1103 affects your rent roll or your next lease, call Kern CRE at 661-885-6949 or contact us. We can help sort out the business terms before you bring in counsel. Get Kern County CRE news monthly: subscribe to the Kern CRE report.
Sources
- California SB 1103, Chapter 1015, Statutes of 2024 (chaptered text), LegiScan, Sept. 30, 2024.
- SB-1103 Tenancy of commercial real properties: agreements: building operating costs, California Legislative Information.
- Civil Code Section 1950.9, Justia, 2025 California Code.
- Civil Code Section 1632, California Public Law.
- Business and Professions Code Section 18000, California Public Law.
- SB 1103 (Menjivar) Senate Third Reading floor analysis, California State Assembly, Aug. 22, 2024.
- What California Landlords Need to Know about Senate Bill 1103, Allen Matkins, Dec. 16, 2024.
- SB 1103: New California Laws Impacts Certain Commercial Leases with “Qualified Commercial Tenants”, Cox, Castle & Nicholson, Dec. 4, 2024.
- SB 1103: What California Landlords and Tenants Need to Know, Carlton Fields, March 11, 2025.
- New Protections for Qualified Commercial Tenants under CA SB 1103, California Lawyers Association, Jan. 8, 2025.
- Town Hall: Key 2025 Legislative Updates: AB 98, SB 1103, AB 2992, AIR CRE, Jan. 30, 2025.
- What to Know about SB 1103, Public Counsel, Nov. 14, 2024.
- Q2 2026 Bakersfield, CA Retail Market Report, Lee & Associates, July 2026.
- Q2 2026 Bakersfield, CA Industrial Market Report, Lee & Associates, July 2026.
- QuickFacts: Kern County, California, U.S. Census Bureau.
About this article
Kern CRE prepared this article with help from AI research and writing tools. An editor reviewed the draft, checked its facts against the sources linked above and edited it for accuracy and clarity. It is general information about California law, not legal advice; talk with a California real estate attorney about your leases, notices and operating-cost practices.