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What California law says about commercial rent control

On Behalf of | Jun 8, 2020 | Commercial Leases

Residential rent control is a cap on the amount of money a landlord can charge tenants per month to lease a living space. It is beneficial for residential tenants because it prevents their rent from increasing to something more than they can afford. However, what is beneficial in residential real estate can be detrimental to commercial real estate.

Approximately 30 years ago, the California legislature recognized the potential statewide adverse economic effects of commercial rent control. Therefore, it passed a law prohibiting any public entity from enacting or enforcing it.

Why is commercial rent control detrimental?

SF Gate explains why commercial rent control is not beneficial. The businesses that receive the benefit of commercial rent control have an unfair advantage over their competitors. This discourages competition among businesses, and the open market suffers as a result.

Why is a statewide prohibition on commercial rent control necessary?

According to the California Civil Code, even if only one community were to enact commercial rent control, the economic impact would extend beyond its borders. The resulting economic drain could extend statewide.

What are the law’s limitations?

The text of the law expressly limits its scope in a number of ways. For example, a commercial lease is a legal document that requires certain duties of both tenants and landlords. The law prohibiting commercial rent control does not relieve either party of the obligation to fulfill his or her duties under the terms of the agreement. Additionally, if a tenant wishes to sublet the property and the landlord allows it, the law does not prevent the landlord from establishing the price required of the sublessee expressly in the commercial lease.