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SB 1103 One Year Later: What California Landlords Have Learned

By Angel Campa·Founder, CapVeri4 min read

What SB 1103 Required

For landlords who missed the initial wave of coverage, the key provisions:

  • Annual reconciliation statements must be delivered within a specified timeline after fiscal year-end
  • Itemized categories must be disclosed at a level of detail beyond what many landlords previously provided
  • Tenant documentation requests must be responded to within defined deadlines
  • Penalties for non-compliance include potential liability for tenant damages and attorney's fees

The law applies to commercial leases in California and covers operating expense reconciliation, including CAM, property taxes, and insurance pass-throughs.

What Actually Changed in Practice

Statement Detail Increased

Before SB 1103, many California landlords sent summary reconciliation statements: a few line items, a bottom-line true-up, and a cover letter. The law's itemization requirements forced a shift to category-level detail.

Property management companies responded in two ways:

The template approach. Larger PMCs (CBRE, JLL, Cushman) updated their standard reconciliation statement templates to include the required detail. This was a one-time effort that applied across their California portfolio. By mid-2025, most institutional landlords were producing compliant statements.

The scramble approach. Smaller landlords and self-managed properties didn't update until tenants or their attorneys pointed out the deficiency. Some are still sending pre-SB 1103 format statements.

Documentation Requests Increased

The clearest operational impact: tenant audit firms and tenant attorneys now cite SB 1103 in documentation requests. The requests haven't changed much in substance — auditors always wanted GL detail, lease abstracts, and occupancy data. But the statutory deadline creates urgency that didn't exist before.

Before SB 1103, a landlord could take 60-90 days to respond to a documentation request, and some delayed longer without consequence. Now, the statutory response deadline creates a concrete compliance obligation. Missing it gives the tenant's attorney a procedural argument that weakens the landlord's position in any subsequent dispute.

Tenant Audit Firms Gained Leverage

Several California-focused tenant audit firms have adopted a strategy of combining substantive findings with procedural SB 1103 violations. Their findings letters now typically include:

  1. Substantive CAM errors (CapEx misclassification, gross-up errors, etc.)
  2. SB 1103 procedural violations (late delivery, insufficient detail, slow documentation response)
  3. A request for refund that bundles both categories

This is effective negotiation strategy. Even if the substantive errors are modest, the procedural violations give the auditor additional leverage. A landlord who settles is often settling to resolve the compliance issue as much as the billing dispute.

Some Things Didn't Change

The law did not change the underlying CAM calculation methodology. Gross-up formulas, cap calculations, pro-rata share allocations, and expense pool definitions are still governed by the lease, not the statute.

Landlords who were already producing detailed, timely reconciliation statements found SB 1103 compliance required minimal adjustment. The law essentially codified best practices that diligent controllers were already following.

Operational Recommendations After 14 Months

1. Update your statement template. If you haven't already, ensure your reconciliation statement format includes SB 1103-required itemization. Do this once, apply it to all California properties.

2. Track response deadlines. Create a tracking system for documentation requests. Log the date received, the statutory response deadline, and the actual response date. Missing a deadline is now a compliance issue, not just a customer service issue.

3. Send statements early. The statutory deadline is the last acceptable date, not the target date. Sending statements 30 days before the deadline creates a buffer and demonstrates good faith.

4. Bundle documentation proactively. When you send the reconciliation statement, include the supporting detail that tenants will request anyway: category-level expense breakdown, occupancy data, pro-rata share calculation. This preempts the formal documentation request entirely.

5. Train your team. Property managers and accounting staff handling California properties need to understand the SB 1103 requirements. A PM who delays forwarding a documentation request can create a compliance violation through simple administrative lag.

The Broader Trend

SB 1103 is the first state-specific CAM transparency law, but it's unlikely to be the last. New York, Texas, and Illinois have seen similar proposals discussed in legislative committees, though none have advanced to the same stage.

The direction of travel is clear: commercial lease operating expense transparency is increasing. Landlords who build compliant processes now — detailed statements, prompt documentation responses, clean calculations — are positioned for whatever comes next.

The cost of compliance is low. A well-organized reconciliation process naturally satisfies SB 1103 requirements. The cost of non-compliance is rising.

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