Commercial Rent Control: Los Angeles – The Ins and Outs

28 Aug, 9:48 am

Amidst discussions surrounding the statewide rent control law and its associated regulations, a unique aspect emerges when we shift our focus to commercial spaces. Unlike their residential counterparts, commercial properties navigate a distinctive set of rules when it comes to renting.

This distinction is rooted in the fact that commercial spaces are explicitly excluded from the scope of the Rent Stabilization Ordinance (RSO) and the broader statewide rent control laws. 

While the RSO and similar laws have a significant impact on apartment, condominium, townhome, and duplex rentals, commercial rent control remains a different territory altogether. 

Let’s delve into the key aspects of commercial rent control in Los Angeles and how it shapes the landscape of business spaces.


Understanding Commercial Rent Control Exemptions


Rent control, a term often associated with residential properties, involves regulations that limit how much landlords can raise rent within a given time frame. 

These controls are intended to provide tenant protection and maintain affordable housing options. However, rental units, such as offices, retail spaces, and industrial units, fall outside the scope of these regulations.


commercial rental office space in westwood california

Courtesy of Canva/GettyImages


Commercial landlords and tenants engage in a unique dance, influenced by a distinct set of rules that differ from those governing residential spaces. One striking factor is the freedom that landlords of rental units have when it comes to setting rent prices. 

Unlike residential rent increases, which often require adherence to strict rent control laws, commercial landlords have more leeway to adjust their rental rates based on market demand, property improvements, and the unique needs of the businesses occupying their spaces.FAQ: What is a commercial lease and how does it differ from a residential lease?

FAQ: What is a commercial lease and how does it differ from a residential lease?

A commercial lease is a legally binding agreement that outlines the terms and conditions under which a commercial space is rented by a tenant from a commercial landlord. 

This type of lease is specifically designed for businesses that require physical spaces, such as offices, retail stores, or industrial facilities. Unlike residential leases, which are tailored for living spaces, commercial leases consider the unique needs of businesses. The terms of a commercial lease often cover aspects such as rent increases, rental prices, lease duration, security deposits, and the permitted use of the space. 

It’s important to note that commercial leases typically involve longer terms compared to residential leases, reflecting the stability needed for businesses to establish and operate effectively.


The Landscape of Commercial Rent in Los Angeles


Los Angeles is a diverse and vibrant city, housing a wide array of businesses, from small startups to established corporations. 

The city’s landscape is dotted with a plethora of commercial spaces, ranging from chic boutiques in Beverly Hills to large corporates in the heart of Westwood and bustling restaurants in the iconic district of Santa Monica.

The versatility and varied nature of these businesses have a significant impact on commercial rent dynamics. 

Unlike residential rentals, which often involve longer lease terms and a more personal living environment, commercial leases tend to be shorter in duration, typically ranging from one to five years. 

This short-term nature reflects the ever-evolving nature of businesses and their need to adapt quickly to market changes and trends.

Consider the example of a small artisanal bakery in the artsy neighborhood of Hollywood. 


small bakery in los angeles

Courtesy of Pixabay


This bakery requires a space that is equipped with specialized ovens, display counters, and a cozy seating area for customers. The unique layout and purpose of this space make it fundamentally different from a traditional residential unit, necessitating a tailored approach to rent control regulations.

FAQ : What is a security deposit, and how does it work in a commercial lease?

A security deposit is a sum of money paid by the tenant to the commercial landlord before moving into the rental unit. 

It serves as a form of protection for the landlord in case the tenant breaches the lease agreement, causes damage to the property, or fails to pay rent. The deposit is refundable, typically at the end of the lease term, after deducting any necessary repairs or outstanding payments. 

The specific terms regarding the deposit, including the amount and conditions for its return, are specified in the lease agreement. It’s important for both commercial landlords and tenants to carefully review and understand the terms related to the deposit to ensure a smooth leasing experience.


Exemption from Rent Control: Exploring the Impact


While the exemption from rent control regulations provides commercial landlords with a level of flexibility, it also poses challenges for businesses trying to maintain stability and plan for the future. 

Rapid and unexpected rent increases can have a significant impact on business operations, particularly for smaller enterprises that operate on tight budgets.

Imagine a startup software company nestled in the heart of downtown Los Angeles. 

The company’s success and growth potential are closely tied to its prime location, which provides access to potential clients, partners, and a vibrant talent pool. 

However, with the absence of rent control restrictions for commercial properties, the company is vulnerable to sudden and substantial rent hikes that could potentially jeopardize its financial stability and expansion plans.

FAQ: What are the rules regarding eviction for commercial tenants in Los Angeles County?

In Los Angeles County, commercial tenants have specific rights and protections in the event of an eviction. 

While residential evictions often require “just cause,” commercial evictions are generally subject to the terms of the lease agreement. However, it’s important to note that certain circumstances, such as non-payment of rent, violation of lease terms, or other breach of contract, can lead to eviction. 

Unlike residential leases, commercial evictions may not always require “just cause.” Commercial landlords and tenants should be well-versed in the terms of their lease agreements and seek legal counsel if facing eviction-related issues.


commercial landlord speaking to tenant in la

Courtesy of Canva/Getty Images Signature

Navigating Commercial Rent Increases: Balancing Business and Costs


In the dynamic landscape of commercial real estate, both landlords and business owners must navigate the delicate balance between fair rents and business sustainability. 

When it comes to commercial rent increases, negotiation strategies come to the forefront. Open communication between commercial landlords and tenants becomes pivotal in reaching agreements that benefit both parties.

Market-driven factors play a crucial role in determining rental adjustments. Businesses situated in prime locations may experience higher rental rates due to high foot traffic and visibility, while those in less bustling areas might have more negotiable terms. 

As businesses evolve, so do their space requirements, and landlords can take this into account when discussing rent adjustments.

Given the complexities of commercial leases, seeking guidance from a property management company can be invaluable. 

These experts can help navigate legalities, draft comprehensive rental agreements, and mediate discussions between landlords and tenants, ensuring a fair and transparent process for all parties involved.

FAQ: How do annual rent increases work for single-family rental properties in Los Angeles County?

Annual rent increases for single-family dwelling units in Los Angeles County adhere to state laws and rental agreements. 

If the same tenant renews, landlords must provide written notice of any rent increase within a specific timeframe. For new tenants, rent increase terms are usually outlined in the rental agreement. 


Looking Ahead: Trends and Considerations for Commercial Rent


The future of rent control of commercial properties in Los Angeles is a subject of ongoing speculation and discussion. 

While commercial spaces are currently exempt from rent control restrictions, there is a growing movement to reconsider this exemption in light of evolving economic dynamics and the need for sustainable business environments.

The city council, along with state lawmakers, may choose to extend tenant protections to commercial spaces in response to concerns about affordability, business continuity, and maintaining a diverse economic landscape. 

In doing so, they would need to strike a balance that addresses the unique challenges faced by both landlords and tenants in the commercial sector.

Property owners and business tenants should stay informed about emerging trends and regulations to anticipate potential changes. 

Staying engaged in city council discussions and consulting with experts in commercial real estate law can help them proactively adapt to any adjustments in the commercial rental landscape.

In conclusion, commercial rent control in Los Angeles is a multifaceted topic that underscores the complexity of the city’s business landscape. The exemption from rent control laws introduces both advantages and challenges for landlords and tenants alike. 

As Los Angeles, Malibu, Hollywood, and Santa Monica continue to flourish, understanding and preparing for potential changes in the realm of commercial rent will be crucial for property owners, business tenants, and the city’s economic resilience as a whole.