SB 1103 and the Qualified Commercial Tenant: What California Changed in 2025

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

SB 1103 is the common label for changes to Civil Code sections 827, 1632, 1946.1, and 1950.9, effective January 1, 2025, that protect California's smallest commercial tenants. They cover microenterprises (five or fewer employees), restaurants with fewer than 10, and 501(c)(3) nonprofits with fewer than 20. A qualified tenant gets 30 to 90 days' notice of month-to-month rent increases, a translated lease in some cases, and documentation of operating cost charges. The tenant must give notice first. Kolmogorov Law, P.C. advises tenants and landlords in Orange County and Los Angeles.

Call (909) 235-6116 or contact us online to discuss whether your tenancy is covered, or what the law requires of your building.

What SB 1103 changed

The law does not sit in one place. It lives in four Civil Code sections, each with a version effective January 1, 2025, and each built around the same term: the "qualified commercial tenant."

Section 827: notice of rent increases on short periodic tenancies.
Section 1946.1: notice to terminate a periodic tenancy.
Section 1632: translation of contracts negotiated in certain languages.
Section 1950.9: fees that recover building operating costs.

The law also leaves a good deal alone. It does not cap commercial rent. It does not require just cause to end a commercial tenancy. It does not change the base rent or term of a signed fixed-term lease, and it does not rewrite the commercial eviction process.

Who is a qualified commercial tenant

The definition has two parts, and a tenant needs both.

First, size and type. The tenant must be a microenterprise, a restaurant with fewer than 10 employees, or a nonprofit organization with fewer than 20 employees. (Civ. Code, § 827, subd. (b)(7)(D).) Nonprofit here means a private nonprofit organization that qualifies under section 501(c)(3) of the Internal Revenue Code. (Civ. Code, § 827, subd. (b)(7)(C).) A microenterprise is a sole proprietorship, partnership, LLC, or corporation that has five or fewer employees, counting the owner, and generally lacks sufficient access to loans, equity, or other financial capital. (Bus. & Prof. Code, § 18000, subd. (a).)

Second, notice. The tenant must have given the landlord written notice that it is a qualified commercial tenant, with a self-attestation of its number of employees, within the previous 12 months. For any tenancy longer than month to month, the notice and self-attestation must be given before or upon signing the lease, and annually after that. The protections come into place when the notice is given. (Civ. Code, § 1950.9, subd. (h)(5).)

I expect most disputes to turn on that second part.

Rent increase and termination notices

The rent increase rule applies to tenancies that run week to week, month to month, or for some other period shorter than a month. The termination rule applies to a tenancy whose term the parties did not specify.

For a rent increase of 10 percent or less, counting all increases in the prior 12 months, the landlord must deliver written notice at least 30 days before the effective date. For an increase greater than 10 percent, the notice period is at least 90 days. The increase is not effective until the period has run. (Civ. Code, § 827, subd. (b).) The statute adds that a violation does not entitle the tenant to civil penalties, so the practical remedy is that the increase does not take effect on time.

To end a periodic tenancy, the owner must give a qualified commercial tenant at least 60 days' notice, or 30 days if the tenant has occupied the property for less than one year. (Civ. Code, § 1946.1, subds. (b), (c).) A landlord's notice under either section must include information about the statute's provisions.

Lease translation

A landlord who negotiates a lease primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean must deliver, before signing, a translation of every term in that language. The rule reaches leases of nonresidential-zoned commercial space made with a qualified commercial tenant on or after January 1, 2025. (Civ. Code, § 1632, subd. (b)(8).) The usual exception for a party who brings its own interpreter does not apply to these leases. (Civ. Code, § 1632, subd. (h)(3).)

If the landlord does not comply, the qualified commercial tenant may rescind the lease. (Civ. Code, § 1632, subd. (k).)

Building operating cost charges

A landlord may not charge a qualified commercial tenant a fee to recover building operating costs unless several conditions are met. The costs must be allocated proportionately and backed by supporting documentation. They must have been incurred within the previous 18 months or be reasonably expected within the next 12. The landlord must give notice of the tenant's inspection right before the lease is signed and must provide the documentation within 30 days of a written request. (Civ. Code, § 1950.9, subd. (a).)

A landlord who violates the section is liable for actual damages and, in the court's discretion, attorney fees and costs. A willful violation, or one involving oppression, fraud, or malice, exposes the landlord to three times actual damages and punitive damages. (Civ. Code, § 1950.9, subd. (e).) The tenant may also raise the violation as a defense to an eviction based on the unpaid fee, and a waiver of these rights is void. (Civ. Code, § 1950.9, subds. (d), (g).)

The section applies to leases signed or renewed on or after January 1, 2025, to short periodic tenancies, and to older leases that say nothing about operating costs. (Civ. Code, § 1950.9, subd. (i).) Our page on CAM charge disputes covers the lease side of the same fight.

If you are the tenant

Send the notice. Put it in writing, state that the business is a qualified commercial tenant, attest to the number of employees, and keep proof of delivery. Calendar the annual renewal. If you are about to sign or renew a lease, deliver the notice at or before signing.

If you are the landlord

Assume some tenants in a small retail center will qualify, and build the process now. Add the inspection-rights notice to the lease package. Keep dated, itemized invoices and an allocation schedule for every pass-through, with a signed attestation ready to send. Update rent increase and termination forms, and track which tenants have delivered a current notice.

What to bring to the first meeting

The lease, renewals, and any month-to-month holdover terms.
A headcount for the business, including the owner, for the last 12 months.
Any qualified commercial tenant notice sent or received, with proof of delivery.
Rent increase, termination, and operating cost notices and statements.

Frequently asked questions

I run a five-person business in a leased storefront. What protections did California's SB 1103 give small commercial tenants?

If your business has five or fewer employees including you, and generally lacks access to financing, it may be a microenterprise under California law. After you give your landlord written notice and a self-attestation, you are entitled to 30 or 90 days' notice of rent increases on a month-to-month tenancy, 30 or 60 days' notice of termination, and documentation of operating cost charges. (Civ. Code, §§ 827, 1946.1, 1950.9.)

Who is a qualified commercial tenant in California?

A small business that passes two tests under California law. It must be a microenterprise, a restaurant with fewer than 10 employees, or a private 501(c)(3) nonprofit with fewer than 20 employees. It must also have given the landlord written notice of its status with a self-attestation of its employee count, current within 12 months. Without the notice, the tenant is not covered.

How much notice must a landlord give a qualified commercial tenant before raising rent?

On a month-to-month or shorter tenancy in California, at least 30 days for an increase of 10 percent or less, and at least 90 days for a larger increase, measured against rent charged in the prior 12 months. (Civ. Code, § 827, subd. (b).) Rent under a fixed-term lease is governed by the lease, not by this notice rule.

Does SB 1103 cap commercial rent in California?

No. SB 1103 regulates notice, translation, and operating cost pass-throughs for qualified commercial tenants. It does not limit the amount of rent a California commercial landlord may charge, and it does not require just cause to end a commercial tenancy.

My landlord negotiated my restaurant lease with me in Spanish but gave me an English-only contract. Can I get out of the lease?

Possibly. If the lease was signed on or after January 1, 2025, and your restaurant was a qualified commercial tenant, California required the landlord to deliver a Spanish translation of every term before signing. A qualified commercial tenant may rescind a lease made in violation of that rule. (Civ. Code, § 1632, subds. (b), (k).) Whether you had given the required notice of your status will matter.

Talk to a California commercial lease attorney

If you are a small commercial tenant with a notice in hand, or a landlord updating your forms, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is located at 327 Magnet, Irvine, CA 92618, and represents businesses in Orange County, Los Angeles, and throughout California.

This page provides general information about California law and is not legal advice. Outcomes depend on the lease, the notices given, the facts, and the court.