California Commercial Lease Operating Cost Disclosure Addendum

California Commercial Lease Operating Cost Disclosure Requirements Under SB 1103

California SB 1103 provides additional protections for qualified commercial tenants. One of the most significant aspects of this law is the requirement that landlords provide specific disclosures about operating expenses and comply with requirements when charging operating costs.

Under this law, landlords must:

• Proportionately allocate operating expenses.
• Limit charges to costs incurred during applicable accounting periods.
• Provide tenants with notice of their right to inspect supporting documentation associated with those charges.

Our California Commercial Lease Operating Cost Disclosure makes it easy for commercial Landlords to comply with these requirements. It includes:

• Building operating cost disclosures
• An explanation of the proportional allocation method used to calculate costs
• The timing and recoverability of operating cost charges
• Disclosure of Tenant rights to inspect supporting documentation
• Procedures for requesting records and documentation
• Specific qualified commercial tenant protections under SB 1103
• Acknowledgment of receipt by both landlord and tenant

Landlords, property managers, and commercial property owners can use this addendum to improve transparency, reduce tenant disputes about operating expense charges, and comply with California's commercial lease disclosure requirements.

Customize this addendum and attach it to your California Commercial Lease Agreement.

Who Should Use the California Commercial Lease Operating Cost Disclosure Addendum

Property owners who lease commercial property in California should use this form any time tenants are charged for building operating costs, common area expenses, utilities, taxes, insurance, or other operating expenses.

What Is a California Commercial Lease Operating Cost Disclosure Addendum?

A California Commercial Lease Operating Disclosure Addendum is a commercial lease disclosure or addendum that property owners use to comply with California’s commercial tenant laws outlined in SB 1103. It is used to inform tenants about any operating expenses charged under their lease and to disclose the tenant’s rights to review supporting documentation.

What Is California SB 1103 and How Does It Affect Commercial Leases?

California SB 1103, known as the Commercial Tenant Protection Act, provides specific protections for small commercial tenants, known as “qualified commercial tenants.” A tenant is considered a qualified commercial tenant if:

• It’s a small business with 5 or fewer employees
• A restaurant with fewer than 10 employees
• A nonprofit with fewer than 20 employees

In order to get the protections of the Commercial Tenant Protection Act, a Tenant must provide the Landlord with written support of its qualifying status.

California SB 1103 provides additional protections for qualified tenants, including extended notice for rent increases, extended notice for lease termination, and operating costs disclosure requirements.

Landlords with small-business tenants need to be familiar with all protections included in SB 1102 to ensure compliance with all applicable California laws.