Increasing Commercial Tenant Protections For California Small Businesses and Nonprofits

Small businesses and nonprofits in California have far fewer protections than residential tenants, and are being forced out of business and displaced from their communities at an alarming rate.

SACRAMENTO- Senator Caroline Menjivar (D- San Fernando Valley) has introduced Senate Bill 1103 to mitigate the increasing costs of operating a small business (25 employees or less) or nonprofit (50 employees or less) in California, and to protect these commercial tenants from unexpected imminent rent increases, hidden added fees, and unclear lease terms. 

“Small business entrepreneurship is a vital avenue for economic mobility for many in my district and across California,” states Senator Menjivar. “Their storefronts contribute to the aesthetics and vitality of our business corridors, as well as increase the walkability and cultural representation within neighborhoods. Also, the San Fernando Valley has always leaned on programs provided by community-based nonprofits. Government agencies alone cannot close the service gaps afflicting the most vulnerable Californians and we rely on the dedicated service of nonprofits. Let’s protect those making immeasurable contributions to their communities and local economies!”

A survey of California small businesses and nonprofits, conducted by the California Reinvestment Coalition (CRC) in 2018, found that 86% of the respondents reported being faced with displacement. Reasons include:

• Small business owners with limited English proficiency often encounter complex commercial lease agreements. While existing state law requires residential leases to be translated in other languages, commercial leases are not.
• On top of rising rents, small business owners and nonprofits commonly encounter exorbitant added fees. Security deposits routinely exceed multiple months of rent and common area maintenance fees can compound the costs without adequate explanation or notice.
• Small businesses and nonprofits are afforded only 30 days’ notice for a rent increase or termination of tenancy. This brief window often precludes them from remaining in their existing location or relocating within the community where they have established substantial connections and name recognition.

Following a small business tour in her district, Senator Menjivar is listening to how owners have been affected.

Faustino Perez, Todos Los Pastelitos Caseros, Panorama City

“Más que nada, recibir una copia de nuestro contrato de arrendamiento en español, mi primer idioma, me hubiera ayudado a tener amplio conocimiento sobre lo que estaba firmando. Lo más importante para cualquier persona es recibir un contrato de arrendamiento en su idioma nativo. También, nos beneficiaríamos enormemente de períodos de notificación más largos, ya que muchos de nosotros simplemente no podemos proceder con nuestros negocios física o financieramente tan rápido. Necesitamos tiempo para encontrar un lugar digno y conseguir todos los permisos necesarios. Una ley como esta garantizará que las pequeñas empresas como la mía tengan mayores posibilidades de éxito".

Translation: “More than anything, receiving a copy of our lease in Spanish, my first language, would have helped me be well informed on what I was signing. The most important thing for anyone is to receive a lease in their native language. We would also greatly benefit from longer notice periods, as many of us simply cannot physically or financially move our businesses that fast. We need time to find a decent spot and to get all the necessary permits. A law like this will ensure that small businesses like me will have a greater chance to succeed.” 

Former Restaurant Owner, City of San Fernando 

“Si me hubieran entregado mi contrato de arrendamiento en español, habría entendido en qué me estaba metiendo. Cuando me cobraban todo este alquiler, mi arrendador simplemente me decía que había aceptado todo al firmar el contrato de arrendamiento, no tenía idea de lo que estaba hablando. De manera similar, una mayor transparencia en las tarifas de mantenimiento de las áreas comunes me habría ayudado a comprender exactamente qué me estaban cobrando. Inicialmente me cobraron dos meses de alquiler por el depósito de seguridad; si este no hubiera sido el caso, podría haber usado ese dinero extra para ayudar a hacer crecer mi negocio. La gente como nosotros necesita leyes como ésta porque, sin ellas, terminamos perdiéndolo todo y ni siquiera entendemos por qué”.

Translation: “If my lease had been provided to me in Spanish, I would have understood what I was getting myself into. When I was being charged all this rent my landlord simply kept telling me I had agreed to everything by signing the lease, I had no idea what he was talking about. Similarly, more transparency in common area maintenance fees would have helped me understand what exactly I was being charged for. I was initially charged two months’ rent for the security deposit, had this not been the case I could have used that extra money to help grow my business. People like us need laws like this because, without them, we end up losing everything and we never even understand why.”

SB 1103 can decrease instances of preventable business closures, and the loss of critical community-based and culturally significant goods and services in neighborhoods by:

• Expanding existing translation requirements to commercial leases.
• Limiting security deposits to one month’s rent for small businesses and nonprofits.
• Increasing the required notice periods for a small business or nonprofit facing a rent increase or termination of tenancy so they are commensurate with those periods available to residential tenants. 

The cosponsors of SB 1103 include Public Counsel, Inclusive Action for the City, Bet Tzedek Legal Services, Lawyers’ Committee for Civil Rights of the San Francisco Bay Area, and CAMEO. These organizations are committed to fighting for increased protections.

“Public Counsel is excited and proud to co-sponsor this groundbreaking legislation that protects community-serving small businesses and nonprofits and creates more transparent and fair rules that reduce the risk of these community pillars being displaced," said Ritu Mahajan Estes, Directing Attorney of Public Counsel's Community Development Project. "The displacement of small businesses and nonprofits not only harms the cultural fabric of our communities but is devastating for families who rely on entrepreneurship to make a living.” 

“Hundreds of small businesses across California have shut down after facing rent hikes and evictions after the COVID-19 pandemic. Commercial tenants deserve stronger rental protections to help them keep their businesses afloat. This bill will ensure that.” -- Lawyers’ Committee for Civil Rights of the San Francisco Bay Area

SB 1103 will be heard in the relevant policy committee(s) in the spring.

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