2025 Legislative Changes Affecting California Commercial Real Estate – A Retrospective
2025 Legislative Changes Affecting California Commercial Real Estate - A Retrospective and Some 2026 Previews
©Norma J. Williams 2025
A look back at legislation affecting California commercial real estate that became effective on January 1, 2025 (or other date as noted) reveals a number of laws that affected the commercial real estate business and legal practices. This article also previews some of the legislation related to those 2025 laws that will become effective in 2026.
LEASING PROTECTIONS FOR CERTAIN COMMERCIAL TENANTS
Effective January 1, 2025, landlords became subject to new obligations when leasing to “Qualified Commercial Tenants” (QCTs), defined as a) microenterprises, entities with five or fewer employees that generally lack access to financial capital; b) restaurants with ten or fewer employees; and c) non-profit organizations with fewer than 20 employees. Summarized, the landlord is obligated to 1) provide additional written notices for rent increases to QCTs, based on the amount of the increase and other factors; 2) comply with certain written notice, documentation and cost allocation requirements in order to obtain recoupment of common area expenses; and 3) translate documents into certain foreign languages if the QCTs negotiated their leases in those languages. In order for a landlord to be subject to the law, a tenant must have notified the landlord of its qualified status and have provided an employee count certification either (1) for leases longer than a month, prior to lease execution, and annually thereafter; or (2) for week-week, month-month or leases shorter than one month, within the preceding 12 months. Each of these requirements are more specifically detailed in the law.
RESIDENTIAL DEVELOPMENT ON COMMERCIALLY ZONED PROPERTIES
Part II of our 2023 Update article and our 2024 article each addressed SB 6 and AB 2011, legislation that addressed the requirements for allowing residential development on property that was zoned for office, retail or parking. Briefly, SB6 categorized certain housing projects as “allowable uses” in areas zoned for office, retail or parking subject to certain requirements including as to density, labor wage payments, site size, required location within an urban area and consistency with existing sustainable community strategies. AB 2011 created an expedited ministerial process for approving two types of multifamily projects on commercially zoned land:
1) 100% affordable housing projects; and 2) mixed income projects along commercial corridors that contained specified percentages of affordable units. While not a lot of use has been made of the tools, the issue remains a current one (see August 11, 2025 Los Angeles Times article entitled “A Second Act for Office Towers?”).
Effective January 1, 2025, the California legislature enacted a new law that either expanded, narrowed or clarified AB2011 and SB6. Projects submitted before December 31, 2024 could elect to be subject to AB 2011 as it existed before the new law or to be subject to the 2025 law.
A summary of the major changes is as follows:
The law adds a new procedural step, requiring that a local agency make a “consistency determination” as to the project’s consistency with the AB 2011 criteria. The determination must be made within 60 days of submittal of the development proposal if the development contains fewer than 150 housing units, within 90 days if the development contains more than 150 units and within 30 days if a re-submittal to address written feedback previously provided by the local government.
Both AB 2011 and SB6 had restricted their use to sites of 20 acres or less for a mixed- income project. The new law expands their use to sites of 100 acres or less on sites that are “regional malls,” as defined in the legislation.
The law makes several changes with respect to density. It creates an “allowable density” concept rather than density that must “meet or exceed” certain amounts, resulting in potentially higher density for some sites. The law also establishes certain minimum percentages of allowable densities. A project’s use of the State Density Bonus Law does not make a project subject to a local discretionary review process or a local density limit. There is no residential density limit for a project that converts existing buildings to residential use unless the development project includes additional new square footage that is more than 20 percent of the overall square footage of the project.
The new law expands the definition of “Industrial Use” and adds several categories of uses that are excluded from the definition. The law also narrows the definition of “Dedicated to Industrial Use.” Qualified projects may not be on or adjacent to any site where more than one-third of the square footage on the site is Dedicated to Industrial Use.
AB 2011 had prohibited qualified projects from having any housing units within 500 feet of a freeway. Under the new law, such projects would be allowed provided that they meet certain air quality standards. The bill excludes freeway on-ramps and off-ramps from the definition of freeway.
The 2025 law is expansive and the foregoing addresses only some of the major changes. 2026 Preview: Major legislation effective in 2026 would also address housing development, including on locations adjacent to transit and on land that has commercial or mixed-use zoning
EXTENSIONS OF TIME AND OTHER PROCEDURES IN UNLAWFUL DETAINER ACTIONS
New law effective in 2025 extended the time within which a defendant could respond in an unlawful detainer action from five days to ten days after the summons was served. Also, under the law, the defendant was permitted, in its response, to either answer or demur. Pursuant to the new law, the defendant, in its response, could also move to strike any portion of the complaint. Any hearing on a demurrer or motion to strike must be held not less than five days nor more than seven days after the filing of the notice of motion, which date could be extended by the court for good cause shown. Any opposition and reply to an opposition could be made orally at the time of the hearing. If a party seeks to have a written opposition considered in advance of the hearing, it must be filed and served on or before one court day before the hearing. The court may consider a later filed opposition.
2026 Preview: Legislation effective in 2026 will base the court’s ability to extend the hearing date on whether the tenancy is residential or is commercial. SITING OF LOGISTICS FACILITIES New legislation in 2025 set forth standards for determining the effect of designated large logistics warehouses on residential communities and also sought to enhance transportation efficiencies. The law imposed statewide standards for any proposed new or expanded logistics use developments as to elements including but limited to, building design and location, parking, truck loading bays, truck routing, landscaping buffers, entry gates and signage. The law’s goal is to protect the occupants of residences, schools and other designated facilities, each of whom are defined as “sensitive receptors.”
2026 Preview: Because of numerous ambiguities in the 2025 law, a “clarification” law was adopted by the legislature, approved by the Governor and chaptered in October, 2025. The law that had been approved as of January 1, 2025 will therefore not be reviewed here apart from the general summary above.
SHORT TERM RENTAL FEES
Our 2024 update article reported on legislation that became effective on July 1, 2024 that prohibited a place of short term lodging, a website, any other platform or any other person from advertising or offering a room rate that did not include all fees or charges before the customer reserved the stay. A violation of the provision was subject to a penalty not to exceed $10,000. New law, effective July 1, 2025, provides that an individual listing of a short term rental must additionally disclose 1) any cleaning fees and the tasks that the consumer has to perform to avoid the cleaning fee; and 2) all of the disclosure requirements of state law with respect to short term stays. Like the 2024 law, the 2025 law also makes a violation of its 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.
STUDY COMMITTEE ON JANITORIAL WORKING CONDITIONS
California, since 2016, has enacted various laws on the working conditions of janitors. Legislation effective in 2025 would require the California Department of Industrial Relations to contract with the University of California, Los Angeles Labor Center to complete a study evaluating opportunities to improve worker safety and safeguard employment rights in the janitorial industry by May 1, 2026. The bill further required the Department, no later than June 15, 2025, to convene an advisory committee consisting of representatives from specified stateagencies, labor and management groups in the janitorial industry and other subject matter experts to make recommendations regarding the scope of the required study. The UC contracting and reporting provisions would end on January 1, 2027.
LAWS AFFECTING MULTI-FAMILY PROPERTIES
Several laws affecting multi-family properties became effective in 2025: 1) prohibition on landlords or their agents charging application fees when they know that no unit is available or will be within a reasonable period of time; 2) requirement (with certain exceptions) that notices be provided to tenants of buildings with 15 or more units of the tenants’ right to require that the landlord report positive rental payment history to at least one nationwide credit reporting agency; 3) prohibition on deducting amounts from security deposits unless reasonably necessary to restore the premises to its condition at lease commencement and requiring (i) starting April 1, 2025 that landlords take photos after a tenant moves out and again after cleaning and (ii) starting July 1, 2025 that landlords also take photos of the property before the beginning of the tenancy; and 4) prohibiting a landlord from charging a fee for serving or delivering a termination notice or for accepting payments by check; and 5) with certain exceptions, prohibiting a landlord from requiring a security deposit in excess of one month’s rent.
2026 Preview: California continued to enact legislation that will become effective in 2026 to address the state’s housing crisis, including with laws regarding multi-family properties.
Disclaimer: Nothing in this article shall be construed as legal advice. Practitioners are advised to consult with their individual legal advisers as to the legal effect of any item described in this article.
Norma J. Williams is a commercial real estate attorney whose exclusively commercial real estate legal practice focuses on financing, purchase and sale, and leasing transactions for office, industrial, retail, multifamily and other commercial real estate. She is a frequent speaker, has authored major real estate legislation and has held leadership positions in local, state, and national real estate bar associations. Among other awards, Ms. Williams received the 2023 Outstanding Real Estate Attorney Award from the Real Property Section of the Los Angeles County Bar Association and was designated a Lawdragon 500 Leading Global Real Estate Lawyer in 2024 and 2025. Ms. Williams received her bachelor’s degree magna cum laude from Wesleyan University and her law degree from University of California, Berkeley. For more information, email contact@willassoc.com or call (213) 996-8464.