By Lee Kaplan
As California’s legal landscape continues to evolve, several new laws taking effect in 2025 are poised to significantly impact the commercial real estate industry. Among the most relevant to commercial real estate professionals is Assembly Bill 1103, which extends new tenant protections to certain small business and nonprofit commercial tenants. Additionally, the California Legislature remains focused on advancing policies that facilitate the construction of new housing.
The summaries below highlight the general ways in which these new laws affect the real estate industry. For specific questions about the new legal landscape or to discuss how a particular project or situation may be impacted by these new laws, we are here to help.
Leasing Protections for Commercial Tenants
SB 1103 – Effective January 1, 2025, SB 1103 extends certain protections to "Qualified Commercial Tenants": (1) businesses with five or fewer employees, (2) restaurants with ten or fewer employees or (3) non-profit organizations with fewer than 20 employees. The bill, among other things, applies translation requirements to qualified commercial leases, regulates operating expense passthroughs for covered tenants, and provides new defenses for covered tenants in eviction proceedings. The bill's provisions operating expense passthroughs are likely the most concerning to commercial property owners, as they include burdensome documentation and notification requirements for expense passthroughs and allow tenants to seek damages for expense overcharges. To take advantage of the bill's protections, a tenant that meets the bill's qualifications must notify the landlord of their qualified status and submit an employee count certification prior to lease execution and annually thereafter. For a more detailed summary of SB 1103's provisions, please review this article by Harvest Senior Counsel Cheryl Neiman Brechlin.
Unlawful Detainers and Evictions
AB 2347 – Effective January 1, 2025, this bill extends the time for a defendant in an unlawful detainer/eviction action to file a response to the lawsuit from five business days to 10 business days after a complaint has been served. The bill also amends existing law to allow a defendant in an unlawful detainer action to respond to the lawsuit with an answer, a demurrer (i.e., a motion to dismiss the case), or a motion to strike (i.e., a challenge to a specific aspect of the complaint), and requires a hearing on a demurrer or motion to strike to be held within five to seven business days of filing. This newly imposed timeline is designed to speed up the unlawful detainer process, and address delays that previously occurred as the result of defendants responding with demurrers or motions to strike.
Builder's Remedy Reforms
AB 1893 – Under prior California law, cities and counties that failed to adopt housing elements that allow for sufficient housing were subject to the "Builder's Remedy" – meaning that they were prohibited from disapproving a housing development that includes 20% lower-income housing, even if the development was inconsistent with applicable zoning and development standards. The Builder's Remedy has required anti-housing cities to approve very large projects that would not otherwise be permitted under local standards. AB 1839 clarifies and codifies the "Builder's Remedy" as an intended consequence of local governments failing to adopt legally sufficient housing plans. The bill also sets new parameters for Builder's Remedy projects, including site restrictions, density limits, and compliance with certain objective local standards, replacing the prior "free-for-all" approach (which resulted in lengthy legal battles and little housing production) with clearer standards and more certainty for developers. The bill also modifies the required affordability percentages for Builder's Remedy projects, limits sites where the remedy applies, and caps density pursuant to specific formulas.
Assumption of Home Mortgage Loans
AB 3100 - This bill, effective as of January 1, 2025, requires a conventional home mortgage loan on residential real property with multiple borrowers to be assumable by one of the existing borrowers. Any of the existing borrowers under a loan is entitled to assume another borrower's portion of the mortgage if the assuming borrower qualifies for the underlying loan.
Buyer-Broker Agreements
AB 2992 – This bill, effective January 1, 2025, requires the execution of a written buyer-broker agreement between a purchaser of real property and a buyer's agent as soon as practicable, but no later than the execution of the buyer's offer to purchase. A "buyer-broker agreement" is defined as a written contract between a buyer and a buyer's agent by which the buyer's agent has been authorized to provide services for or on behalf of the buyer for which a real estate license is required.
Mobile Home Solar Restrictions
SB 1190 – This bill renders unenforceable any covenant, condition, or restriction applicable to a tenant or owner-resident in a mobile home park; in a subdivision, cooperative, or condominium for mobile homes; or in a resident-owned mobile home park that effectively prohibits or restricts the installation or use of a solar energy system on the mobile home or on the site where the mobile home is located.
Accessory Dwelling Units (ADUs)
AB 2533 – This bill, approved by the Governor on September 28, 2024, prohibits a municipality from denying a permit for an unpermitted accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) that was constructed before January 1, 2020, absent a finding that correcting a violation is necessary to comply with conditions that would otherwise deem a building substandard. Municipalities are required to inform the public regarding the prohibition on denial of permits and provide a checklist of conditions that may render a building substandard. Homeowners also must be informed that, before submitting a permit application for an existing unit, the homeowner may obtain a confidential third-party code inspection. The bill also prohibits the imposition of impact fees or connection or capacity charges to obtain a permit if certain income qualifications are met. Local agencies are prohibited from penalizing applicants for having unpermitted units and are also required to approve necessary permits to correct noncompliance with health and safety standards.
SB 1211 – This law, approved by the Governor on September 19, 2024, expands the possibilities for the addition of ADUs on multifamily properties. SB 1211 increases the maximum number of detached ADUs that may be added to a multifamily property from two to up to eight, depending on the existing number of units on the site. The bill also prohibits local governments from requiring replacement of surface parking spaces when existing parking is repurposed for ADUs.
Subdivisions
SB 1123 – This bill, approved by the Governor on September 19, 2024, expands the provisions of SB 684 (2023), a law that allows for the subdivision of multifamily-zoned lots of five acres or fewer into up to ten for-sale lots. SB 1123 extends subdivision streamlining to vacant single-family residential lots of less than 1.5 acres. The maximum unit count of ten units is amended to not include ADUs if local governments would like them built – meaning that a local agency could potentially allow up to 20 housing units to be built on covered sites.
Parking Requirements
AB 2553 – This bill, approved by the Governor on September 19, 2024, expands the applicability of AB 2097 (2023), a law which eliminated minimum parking requirements for new residential, commercial, and other development projects located within half a mile of a "major transit stop" with 15-minute headways. AB 2553 revises the definition of "major transit stop" to include sites with bus routes running at least every 20 minutes. This expands the applicability of AB 2097 to more locations. The bill also reduces vehicular traffic impact fees for housing developments built in covered locations.
Residential Landlord-Tenant Laws
AB 2493 – This bill, effective January 1, 2025, prohibits landlords or their agents from charging an application screening fee when they know or should have known that no rental unit is available at the time the fee was charged, or will be available within a reasonable period of time. The bill also establishes general requirements for the imposition of application fees, requiring landlords to either return fees paid to applicants who are not selected within specified periods, or adopt application screening processes that meet specified criteria in order to charge and retain a screening fee. Additionally, when a fee is charged, AB 2493 requires the landlord or their agent to provide a copy of the applicant's consumer credit report, regardless of whether the applicant has requested it, within seven days of the landlord or agent receiving the report.
AB 2747 – This bill, effective January 1, 2025, requires a notice to be provided to tenants of buildings with 15 or more units of the tenants' right to have the landlord report positive rental payment history to at least one credit reporting agency. Notice must be provided after April 1, 2025, for existing leases, and upon execution for leases entered into after that date. It must then be provided to the tenant at least once annually thereafter. The required notice must include specific information listed in the bill. If a tenant opts in to positive credit reporting, the landlord may pass through the costs of reporting up to a maximum of $10 per month.
AB 2801 – This bill, effective January 1, 2025, prohibits a landlord of residential property from deducting costs for materials or supplies, the work of a contractor, or professional carpet cleaning services from a tenant's security deposit unless reasonably necessary to restore the premises to original condition before the tenancy, less ordinary wear and tear. The bill also requires security deposit accounting statements to include photographic documentation of the need for deductions. Starting April 1, 2025, landlords must take photos of the unit after the tenant moves out, but before repairs or cleanings, and additional photos once repairs or cleanings are complete. For leases beginning on or after July 1, 2025, landlords also take photos before the beginning of the tenancy.
SB 611 – This bill, effective January 1, 2025, prohibits a residential landlord from charging a fee for serving or delivering any type of termination notice (such as a notice to pay rent or quit) to a tenant. The bill also prohibits landlords from charging fees for paying for rent or security deposits by check. SB 611 also provides that after April 1, 2025, if a landlord charges a higher security deposit for a military service member due to credit factors, a written statement must be provided explaining the reason for the higher amount, along with a provision in the lease requiring the return of the extra deposit after six months.
SB 1051 – This bill, approved by the Governor on July 2, 2024, requires landlords to change the locks for a tenant, at the landlord's own expense, within 24 hours of being informed that a tenant or a member of the tenant's household has been a victim of domestic violence. If the landlord fails to change the locks, the landlord must reimburse the tenant within 21 days if the tenant changes the locks. The tenant must notify the property owner within 24 hours that the locks have been changed and must provide the landlord with a key.