For decades, commercial leasing in California has been governed by the assumption that commercial tenants generally possess sufficient sophistication to negotiate and protect their own interests. Senate Bill 1103, known as the Commercial Tenant Protection Act (“CTPA”), alters that framework for certain smaller commercial tenants. Effective January 1, 2025, the law extends several protections traditionally associated with residential tenancies to qualifying commercial tenants. The statute imposes new requirements relating to rent increase notices, lease translations, common area maintenance (“CAM”) charges, and termination notices. Landlords leasing space to small businesses, restaurants, and nonprofit organizations should understand when these requirements apply and consider whether updates to existing leasing practices are warranted. Who Is a “Qualified Commercial Tenant”? The CTPA applies only to a “qualified commercial tenant” (“QCT”), not to all commercial tenants. A tenant qualifies if it is: 1. A microenterprise, generally defined as a business with five or fewer employees and limited access to capital; 2. A restaurant with fewer than 10 employees; or 3. A nonprofit organization with fewer than 20 employees. Publicly traded companies and their subsidiaries are excluded from the statute’s protections. However, franchisees may still qualify if they independently satisfy the applicable employee and eligibility requirements. Importantly, a landlord’s obligations under SB 1103 are triggered only after the tenant provides written notice affirming its status as a qualified commercial tenant. That notice must have been provided within the preceding 12 months. Until the landlord receives the required attestation, the statute’s protections generally do not apply. The law applies to commercial leases executed, renewed, or amended on or after January 1, 2025. CAM Charges: New Transparency and Substantiation Requirements One of the most significant operational changes under the CTPA involves CAM charges and other operating expense pass-throughs. Before charging a QCT for CAM expenses or similar costs, landlords must ensure that: 1. The costs are allocated proportionately among tenants through square footage or another reasonable and documented methodology; 2. Supporting documentation regarding the allocation method is provided before lease execution and, upon written request, within 30 days; and 3. The charges either were incurred during the prior 18 months or are reasonably expected to be incurred during the next 12 months, with documentation supporting the amounts charged. These requirements may create practical challenges for landlords, particularly in shopping centers or mixed-use properties where CAM allocations involve anchor tenants, negotiated exclusions, or other unique arrangements. The substantiation requirement may also limit the flexibility landlords have historically exercised in estimating or “grossing up” operating expenses. As a result, some landlords are reevaluating the use of gross or modified gross lease structures, including forms commonly used in AIR leases, to minimize the administrative burden associated with CAM compliance. Longer Notice for Rent Increases and Terminations SB 1103 also expands notice requirements for certain qualified commercial tenants. For month-to-month tenancies and other periodic tenancies, Civil Code section 827(a) requires: 1. At least 30 days’ written notice for a rent increase of 10 percent or less; and 2. At least 90 days’ written notice for a rent increase exceeding 10 percent. The statute also incorporates Civil Code section 1946.1(a) for qualified commercial tenants. If a tenant has occupied the premises for more than 12 months, a landlord generally must provide at least 60 days’ written notice before terminating the tenancy. Landlords who routinely rely on standard commercial notice provisions should review their forms and procedures to confirm they remain compliant when dealing with QCTs. Enforcement: Why Compliance Matters Compliance with the CTPA is important because many of its protections cannot be waived by agreement. A landlord that violates the statute may face liability for damages and attorneys’ fees. In cases involving willful or oppressive conduct, punitive damages may also be available. In addition, a tenant may raise a statutory violation as a defense in an unlawful detainer action, potentially complicating or delaying efforts to recover possession of the property. Given these risks, landlords should review both their lease documentation and day-to-day leasing procedures. What Landlords Should Do Now Landlords should consider taking the following steps before entering into new leases or renewals with smaller commercial tenants: 1. Review existing tenant rosters to identify tenants who may qualify for CTPA protections. 2. Evaluate current lease forms and update provisions relating to CAM charges, notices, and lease translations where necessary. 3. Establish procedures for receiving and tracking tenant qualification notices. 4. Consider whether gross or modified gross lease structures may be appropriate for certain tenants in order to reduce CAM-related compliance issues while maintaining the intended economic terms of the lease. The Commercial Tenant Protection Act represents a notable shift in California commercial leasing law. Although the statute applies only to a limited category of tenants, its requirements can affect lease administration, expense recoveries, and enforcement rights. Landlords should take a proactive approach to identifying qualified commercial tenants and updating leasing practices to address the law’s requirements.  At Reicker Pfau, we assist commercial landlords with lease reviews, compliance strategies, property operations, and dispute resolution matters. If you have questions regarding SB 1103 or its application to your properties, please contact our office.

Reicker, Pfau, Pyle & McRoy, LLP proudly represented COR, an AI-powered project profitability platform for agencies and professional services firms, in connection with a $30 million investment from FTV Capital, a sector-focused growth equity firm. COR combines project management, automated time tracking, resource planning, and real-time profitability analytics in a single platform. The company serves thousands of teams across more than 38 countries. The investment will support the continued development of COR’s AI capabilities, expansion into adjacent industries, and international growth. As part of the investment, FTV Capital Partner Alex Malvone and Principal Tommy Tighe joined COR’s board of directors. The Reicker Pfau team was led by Partner Nicholas Behrman, with Associates Jake Glicker and Samara Harris. A full announcement regarding the investment can be found here .

Complying with applicable employment laws is a never-ending battle for California employers. While certain changes and updates can easily become part of a compliant employer’s annual routine, such as increasing employees’ wages to align with effective minimum wage updates, refreshing the applicable posters required to be displayed in the workplace, and reviewing employee salaries to determine which exempt employees need raises to continue to qualify as exempt, new laws mean new required updates to an employer’s policies and procedures. For any employer that has not yet reviewed their employment practices through the 2026 lens, here is a short guide for some essential updates to implement immediately. Minimum Wage Effective as of January 1, 2026, the statewide minimum wage has increased to $16.90 per hour. Additionally, the minimum annual salary for “exempt” employees has increased to $70,304. Please note that these minimums are set at the statewide level, but an employer may be subject to higher minimums depending on the applicable local jurisdiction and employer’s industry. For example, effective January 1, 2026, the minimum wage in West Hollywood is $20.25 per hour. Pay Scale Information In addition to the updated minimums regarding what employees must be paid, employers are also now restricted in what they must communicate to potential employees regarding the expected salary or hourly wage range for the applicable job posting. As part of SB 642 , signed into law by Governor Newsom on October 8, 2025 and effective January 1, 2026, employers with 15 or more employees are required to provide clearer details in any job posting regarding the pay scale for the applicable position. The applicable “pay scale” cannot be a general range for what an employee in that position may make in the future. Instead, SB 642 redefines “pay scale” to mean “a good faith estimate of the salary or hourly range that the employer reasonably expects to pay for the position upon hire.” Updates to Mandatory Cal/WARN Notice Requirements Certain California employers are also subject to additional information and notice requirements. Pursuant to SB 617 , employers subject to the California Worker Adjustment and Retaining Notification (“ Cal/WARN “) Act who are required to provide written notices before ordering a mass layoff, relocation or termination at a covered establishment must now include in such notices whether or not the employer plans to coordinate services for the affected employees, such as a rapid response orientation, and through which entity such services will be coordinated, if at all. The notices must also include a functioning email address and telephone number for the local workforce development board and particular language pointing employees to local workforce development boards and America’s Job Center of California. Such employers will also need to include in the applicable notices a description of CalFresh (the statewide food assistance program) and CalFresh contact information in the form of the phone number for the CalFresh benefits helpline and a link to the CalFresh website. Workplace Know Your Rights Act  California employers, as of February 1, 2026, are also subject to the Workplace Know Your Rights Act, established by SB 294 . Among other things, the Workplace Know Your Rights Act requires such employers to provide a stand-alone written notice to each of its current employees on February 1, 2026, and annually thereafter, containing a description of workers’ rights in areas such as (i) the right to workers’ compensation benefits, (ii) the right to notice of inspection by immigration agencies, (iii) protection under unfair immigration-related practices, (iv) labor organizing rights, (v) constitutional rights when interacting with law enforcement at the workplace, (vi) a description of certain new legal developments as determined by the California Labor Commissioner, and (vii) a list of the enforcement agencies that must enforce the underlying rights set forth in the notice. Template notices have been posted by the California Labor Commissioner and can be used by employers to comply with the notice requirements of the Workplace Know Your Rights Act. To ensure compliance with current California employment laws, employers should closely review their company policies and procedures regularly and check in with their employment counsel for relevant updates and reminders about best practices.

Artificial Intelligence is on the precipice of ubiquity. It is a tool with seemingly infinite uses including helping us write “Thank You” letters, find cooking recipes, and even creating fun pictures based on a text prompt. For all intents and purposes, AI has been extremely helpful, even fun. Accordingly, it is only natural for people to turn to AI to help with their legal questions with the added benefits of being an inexpensive and instant. But “inexpensive” and “instant” do not equate to “good” or even “correct.” In fact, using AI for legal questions, drafting contracts, or performing case research may ultimately cost clients significantly more money in fees or adverse monetary judgments in the long run. AI Is Built On An Unsecured Foundation Pulling back the curtain of the AI prompt screen, is a program built upon algorithms to imitate human behavior based on inaccurate, or at best, outdated legal information. At worst, AI will completely make up legal authorities called “hallucinations.” 1 AI systems rely on data inputs, aka prompts, and if these inputs are flawed, the outputs will undoubtedly be as well. Many AI tools have been found to perpetuate biases present in their training data, potentially leading to misleading results. 2 Accordingly, if clients rely on AI-generated analysis without attorney oversight, then there is a strong possibility your client could rely on incorrect legal citations or misinterpretations of case law, ultimately, jeopardizing their position. Further, these biases are not just present in AI itself. When clients use AI for legal questions, they phrase prompts in a way that reflect their desired outcome rather than neutrally. Their own inherit bias creates a detrimental problem because AI tools tend to tell its users what they want to hear. The models are designed to be helpful, and they often provide confident sounding but legally inaccurate or misleading responses tailored to the assumptions in the prompt. Moreover, the law is not static. Laws change and they can be interpreted differently among various jurisdictions, and in some cases, even courts within the same jurisdiction. This presents a significant issue because AI that is trained on older data, or worse, provide responses inapplicable to a client’s specific jurisdiction. Thus, AI will miss recent court rulings, new statutes or state-specific rules. Another issue with AI is, and this may come as a surprise, that it is not human. AI has no wisdom or experience. The practice of law requires the application of a unique set of facts to the law. Most AI tools are not trained to weigh client-specific factors with risks and strategic considerations — all necessary aspects of the art of practicing law. To put more eloquently, I’ll rely on Oliver Wendell Holmes’ famous quote, “The life of the law has not been logic; it has been experience.” So, despite analyzing terabytes of data to train its models, AI has no experience, and ultimately, its use may cause the client more harm than help. The Costs Clients Incur From Using AI As Their Attorney It is not uncommon for clients to bring their “research” to their attorneys expecting confirmation, slight refinement, or further explanation. Instead, the attorney must analyze every argument and fact-check every cited case to ensure it is not a hallucination. Frequently, attorneys will have to take even more time to explain to the client why the AI arguments or claims are not tenable. In other words, attorneys will need to spend more time than if they had been simply consulted from the start. Another common example involves a client using AI to draft a contract. Although the contract may appear like a well-written contract with verbose “legalese,” these often miss critical legal terms or include outdated, unenforceable provisions. Such faulty contracts can hurt clients infinitely more than had they just used an attorney to draft contracts tailored for them instead of a full redraft of AI slop. Importantly a client’s use of AI does not just hit them in the wallet, its use may need to be disclosed in discovery. Courts have found AI use for legal matters is not legally protected. The information a client used in a prompt and the AI produced in response is all discoverable. 3 In U.S. v. Heppner a trial court found client AI prompts and generated documents were not privileged because by inputting confidential information into a consumer AI platform operated by a third party, the client voluntarily disclosed that information outside the attorney-client relationship. Moreover, Heppner noted the AI platform’s terms of service and privacy policy that permit data collection, retention, and found that these policies negated any reasonable expectation of confidentiality. Thus, it is critical that attorneys stress the detrimental effects their AI use may have on their case. What To Do This article is not intended to cast aspersions on the use of AI in the legal field. It is an incredibly powerful tool getting more and more valuable every passing year. AI can review documents, summarize depositions, and generate outlines of cases in the snap of a finger. However, it still lacks the practical and legal knowledge of an attorney to tailor specific facts in a specific jurisdiction to determine the best course of action for a client. At the outset of representation clients must understand that AI is unreliable when it comes to (1) legal research, (2) jurisdictional distinction, and (3) practical, common sense judgment. Moreover, if a client is to use AI for their legal issues, they must make sure that the AI platform they use (1) does not retain data or use it for data training; (2) uses confidentiality protections for input data; and (3) use AI under the attorney’s direction and supervision as part of the attorney’s legal strategy. Understanding each of these points will help save your client money, time, and energy. — 1 Stanford University Human-Centered Artificial Intelligence: Dan Ho, et al.: “AI on Trial: Legal Models Hallucinate in 1 out of 6 (or More) Benchmarking Queries” (evaluating claims by LexisNexis (creator of Lexis+ AI) and Thomson Reuters (creator of Westlaw AI-Assisted Research and Ask Practical Law AI) that their use of retrieval-augmented generation (RAG) helps significantly “‘avoid’ hallucinations and guarantee ‘hallucination-free’ legal citations.” The study found that , while RAG systems “do reduce errors compared to general-purpose AI models like GPT-4 [–] a substantial improvement [–] these bespoke legal AI tools still hallucinate an alarming amount of the time: the Lexis+ AI and Ask Practical Law AI systems produced incorrect information more than 17% of the time, while Westlaw’s AI-Assisted Research hallucinated more than 34% of the time.”) 2 LLM models used in healthcare “may recapitulate harmful, race-based . . . content when responding to eight different scenarios that check for race-based medicine or widespread misconceptions around race. . . . This study shows that based on our findings, these LLMs could potentially cause harm by perpetuating debunked, racist ideas.” (Politico, “Why Your Chatbot’s So Racist,” Dec. 12, 2023 (report on study showing racial bias in AI models used in healthcare).) 3 United States of America v. Bradley Heppner (S.D.N.Y. 2026) 25 Cr. 503. There, a former CEO accused of swindling investors out of $300 million. After the CEO received a grand jury subpoena, he used an AI platform by typing details he got from his lawyers into the AI’s command prompt. The AI tool generated numerous documents in response to the CEO’s prompts, including an outline of a defense strategy based on the charges his lawyers anticipated. The government argued such documents were discoverable. The CEO argued they were not because the documents were protected by the attorney-client privilege that applies to third parties such as a consulting witness; attorney-client privilege; and work-product doctrine.

Reicker Pfau, Pyle & McRoy, LLP (RPPM) was proud to serve as a sponsor of AngelCon 2026, an event that brings together Central California tech-based startups who receive training and mentorship through Cal Poly’s Small Business Development Center and outside angel investors who advise each of the participating start-ups throughout the entire process.  The annual event is propelled by a dedicated group of angel investors interested in investing in early-stage startups […] The post Reicker Pfau Supports Innovation as Sponsor of AngelCon appeared first on Reicker Pfau.