2024 Legislative Changes Affecting California Commercial Real Property
©Norma J. Williams 2024
Numerous pieces of legislation affecting California commercial real estate became effective on January 1, 2024 (or other date as noted).
Remote Online Notarization
At present, 44 states permit remote online notarization (“RON”). California is not one of them. California has now enacted the Online Notarization Act that would permit RON, effective on the earlier of January 1, 2030, or when the Secretary of State certifies that it has completed the technology necessary to implement the statute. The legislation permits notarial transactions through audio-visual communication and sets standards for credential analysis, security and privacy and data retention. Notaries must register with the Secretary of State to perform online notarial transactions and may provide services in the US and outside the US if the act is not prohibited in the jurisdiction where the principal is located.
Restaurant Operations in Expanded License Areas and Related Provisions
In an expansion of law and authorizations adopted during the pandemic, new law extends until July 1, 2026 rights previously granted to the State Department of Alcoholic Beverage Control licensees to: 1) continue the on-site sale of alcoholic beverages in an expanded license area adjacent to the licensed premises for which the licensee has on-site sale privileges; and 2) prepare and serve food at a temporary satellite food service in an area in reasonable proximity to the licensed facility, without obtaining a separate satellite food service permit or submitting written operating procedures. Standards for the satellite facility are in the statute and the written operating procedures are to be maintained onsite for review upon request by the local agency. If local agencies have not done so, the law requires that they adopt ordinances to reduce the number of required parking spaces for other existing uses by the number of spaces that the local jurisdiction determines are needed to accommodate expanded outdoor dining areas.
Energy Benchmarking
My 2015, 2016, and 2017 update articles addressed prior efforts of the California State Energy Commission to require building owners to deliver certain building energy usage information to the Commission and to require each utility to deliver aggregated energy usage information to building owners and related parties. Under the prior legislation, it was not necessary to provide usage information for buildings with less than 50,000 square feet of gross floor area. Legislation effective January 1, 2024 now also exempts buildings with 16 or fewer residential units. The new legislation also requires the Commission, in connection with other state agencies, to develop strategies to use the collected data to track and manage the energy usage and emissions of greenhouse gases in order to meet the state’s goals, targets, and standards for greenhouse gases. The legislation specifies guidelines to be followed by the Commission and stakeholders with whom the Commission must consult in developing the strategies.
Trauma Kits
Legislation effective in 2023 required trauma kits in buildings constructed after January 1, 2023. Legislation effective January 1, 2024 now also requires at least six kits to be in designated types of commercial, governmental, and multi-family housing buildings that are constructed prior to January 1, 2023, when those buildings are modified, renovated, or tenant-improved after January 1, 2024. A structure is considered tenant-improved if it is subject to $100,000 or more of tenant improvements or building renovations in one calendar year. For a place of assembly, including a performing arts center or a movie theater, any amount of improvements triggers the obligation. The law does not apply to certain licensed health facilities to which patients are admitted for 24 or more hours or to Department of Corrections facilities if placement would be a safety concern.
Tenants of buildings meeting the qualifications must be notified of the location of the trauma kits and provided information on training available on the use of the kits. The law exempts from liability for civil damages: 1) a person who complies with the requirement to obtain and place the trauma kit, as to damages resulting from the rendering of emergency care by use of the trauma kit; and 2) a property manager for damages resulting from the failure, improper operation or malfunction of equipment or materials in a properly stocked trauma kit.
Cancellation of Hotel and Private Rental Reservations; Fee Transparency
New legislation would require a hotel, third-party booking service, hosting platform, or short-term rental to allow the cancellation of a reservation made 72 hours or more before the time of check-in for at least 24 hours after the reservation is confirmed. Refund to the original form of payment must be made within 30 days of cancellation. The bill requires the assessment of a penalty of not more than $10,000 per day for each violation, with the amount to be based on the consideration of certain factors. The bill does not apply to reservations: 1) that are made for a negotiated rate that was not advertised or available to the general public; 2) that are confirmed before July 1, 2024; and 3) in which the specific hotel or short-term rental is not disclosed to the consumer until after the booking is confirmed.
Other legislation, which becomes effective on July 1, 2024, would prohibit a place of short-term lodging from advertising or offering a room rate that does not include all fees or charges required other than taxes and fees imposed by a government. That bill would make a violation of the provisions subject to a penalty not to exceed $10,000 and would authorize an enforcement action to be brought by a City Attorney, District Attorney, County Counsel or Attorney General.
Airport Lease Term
The law in effect prior to January 1, 2024 provided that a local agency could lease or sublease property for stated airport purposes for a period not to exceed fifty years. Interpretations in some counties was that 50 years was the cumulative maximum period for such a lease. The law now provides, with respect to such a lease, that the local agency may also 1) amend the lease or sublease to extend the duration of the lease or sublease, up to a maximum of 50 years per extension; 2) terminate the lease or sublease and enter into a new lease or sublease with the same or a related party, to provide for the addition of improvements to the leasehold for the sustainability of the airport; or 3) transfer an existing lease or sublease to a new or related entity and issue a new lease not to exceed a term of 50 years.
Multi-Family Housing Laws
The California legislature enacted or amended a number of significant laws affecting multi-family housing with respect to CEQA, density bonuses, streamlining of approvals, land use, and enforcement. A full review of those laws is beyond the scope of this article. A few noteworthy new laws related to legislation that we have previously reviewed are:
New California law follows up on 2022 legislation governing conversion to housing of property zoned for retail, office, or parking uses (reported on in Part II of our 2023 update article). The new legislation provides that such conversions are a “pro-housing policy” that would give such projects preferential points in applications for certain housing and infrastructure programs. The new legislation also directs the Department of Housing and Community Development (“HCD”) to convene a working group comprised of designated state agencies to “identify challenges to, and opportunities to help support, the creation and promotion of adaptive reuse residential projects.” A report of the findings is to be made by HCD to the legislature by December 31, 2025.
- SB35 was legislation passed in 2017 that allowed the production of certain types of affordable housing when a city has not met its state-mandated Regional Housing Need Allocation targets. SB35 provided for a streamlined ministerial approach of projects, removed the requirement for CEQA analysis, and removed the requirement for Conditional Use Permits or other similar discretionary entitlements. SB 35 may also be invoked by developers utilizing California’s 2022 SB6 to convert property zoned for retail, office, or parking uses to housing, as described in Part II of our 2023 update article.
Legislation effective in 2024 extends the SB 35 provisions so that they now sunset in 2036 rather than 2026. The legislation effective in 2024 also 1) except for certain size projects, removes the “skilled and trained workforce” laws that require the use of journeymen and apprentices trained as set forth in the laws; 2) effective January 1, 2025, extends SB35’s applicability to projects in the coastal zone that are zoned for multifamily housing, subject to certain exceptions; 3) makes a jurisdiction subject to the SB 35 streamlining requirements if it failed to achieve a compliant housing plan certified by HCD; 4) provides that 100% below market rent projects can qualify for streamlining so long as they charge a rent that is consistent with the maximum rent levels stipulated by the public program providing financing for the development; and 5) provides for public hearings on the SB 35 projects if they meet certain designations by HCD and the California Tax Credit Allocation Committee.
-Our prior 2021, 2022, and 2023 articles reported on changes to California’s density bonus laws. Legislation effective in 2024 grants additional bonuses to projects that maximize the production of very-low, low, or moderate units, allowing such projects to “stack” additional bonuses on top of the prior maximum bonuses. The legislation also provides the first opportunity under California law to receive a density bonus for moderate-income rental units.
Disclaimer: Nothing in this article shall be construed as giving legal advice. Practitioners are advised to consult with their individual legal advisers as to the legal effect of any item described in this article.