This 1987 loophole is being used to evict LA business owners

This story first appeared on The LA Local.

PJ Roden had been on a month-to-month lease at her storefront, Sip Snack, on York Boulevard for seven years when her landlord called in April to say someone was coming to measure the building.

“I asked him, are you selling?” Roden told The LA Local.

He admitted he was, for around $4 million, though the building ultimately sold for $5.1 million in cash within a few weeks.

“Mom-and-pop landlords in L.A. give you a one-year lease and then never give you another one,” she said. “They want you month-to-month because that way, if they sell the building, they can raise the rent by a lot, or kick you out.”

Roden had begged her landlord for a lease before the sale closed.

“He wouldn’t,” she said. “He just told me not to worry, that my rent would probably just be raised.”

A few weeks later, a law firm representing the new owners sent a letter giving tenants on the block 60 days to vacate.

Dr. Donald Abraham, who is listed in property records as the owner of the building that housed Sip Snack, did not respond to requests for comment. Specialized Realty, the management company that took over the property, also declined to comment.

Roden and her fellow business owners faced a stark realization. While residential renters in California enjoy state eviction protections, a 39-year-old legal loophole allows acquisition firms to buy neighborhood property, triple rents overnight and issue 60-day notices to vacate.

PJ Roden, owner of Sip Snack on York Boulevard, at work.

(

Courtesy of PJ Roden

)

‘We don’t get to negotiate.’

That legal gap dates back to the Costa-Knee-Seymour Commercial Property Investment Act of 1987, which prevents California cities from capping commercial rent increases. The state also does not have a just-cause eviction standard for commercial tenants, meaning landlords can raise rents or end leases with few restrictions.

“Nobody will talk to us. There’s no communication. We don’t get to negotiate — we’re just being kicked out,” Roden said. “That’s devastating for a small business. I put my life savings into Sip Snack, close to $100,000, building out the space, the equipment, the liquor license to sell wine, and now I have to start all over again.”

Roden said it could take her up to a year to regain her wine license if the city grants one. She made many of these investments five years ago and is still paying them off.

She wasn’t alone. Two Sons, a shop Roden had encouraged her friend Annika to expand into the building two years earlier, was evicted too. As was Junior’s, a 99-cent party-supply store run by Sylvia Flores. And so was Crazy Scissors, a hair salon whose owner had operated there for 25 years.

“He has no place to go,” Roden said. “It’s not easy to move a hair salon. He’s going to have to close and work out of somebody else’s.”

Judith Goldstein, co-owner of Luca Essentials, an eco-friendly commercial drugstore in Highland Park, also got pushed out of her space.

Both Roden and Goldstein have since relocated — Sip Snack a block down York Boulevard, Luca Essentials across the street from its old address — landing on their feet only because a nearby space happened to open at the right moment. 

But Goldstein said she’s fearful the Costa-Knee loophole could get her again if this new space is sold to a new landlord. “There’s no cap,”  Goldstein said. “They can literally say tomorrow your rent is $30,000 — it sounds crazy, but they can do that.”

“Legally, we have no standing,” Roden said, “and that’s why we’re trying to change the law at a legislative level.”

A new state law offers some protections, but only for certain small businesses and only in limited situations.

‘It’s a farce.’

Senate Bill 1103, the Commercial Tenant Protection Act, went into effect in January 2025 and requires landlords to give “qualified” microbusinesses 90 days’ notice before a rent increase of more than 10%. It also requires 60 days’ notice before terminating a lease.

But Goldstein said, “It’s a farce.”

Los Angeles County has more than 236,000 microbusinesses with nine or fewer employees, according to 2021 Census data. Those are the types of businesses SB 1103 was designed to protect, but the law only generally applies to businesses that have five or fewer employees, restaurants with no more than 10 and small nonprofits up to 20. More importantly, it sets no ceiling on how large an increase can be.

Bell Gardens locksmith Ernesto Torres, who has leased his storefront for 13 years, has called the law “lukewarm” for that reason.

“If a 30% rent increase happens and the tenant can’t pay, the eviction notice arrives. There’s nothing a tenant can do,” Torres said.

Public Counsel attorney Ritu Mahajan told The LA Local that her organization has represented commercial tenants whose rent rose as much as 200% in a single year.

Judith Goldstein (center right), co-owner of Luca Essentials, with her team outside the shop’s new location on York Boulevard.

(

Courtesy of Judith Goldstein

)

‘This should be illegal.’

Goldstein’s fight has been slower and less about a single notice than about a landlord she said let her building fall apart with no legal obligation to fix it. Pegasus Management Company manages her building.

“Our toilet burst into our bathroom,” she said. “They refused to clean it. They refused to pay to fix it. Right now I have about 20 leaks in our ceiling every time it rains, and they refuse to do anything.”

Pegasus Management Company declined to comment.

Goldstein said problems began after the vacant unit next door was leased to a cannabis business that gutted the space and later abandoned the build-out. She said the management company rarely addressed the resulting rodent and insect issues and charged her thousands of dollars when it did.

“Every lawyer I spoke to said the same thing,” Goldstein noted. “You’re completely right, this should be illegal. But there is zero protection for you.”

Her rent was capped by lease terms at 2% annual increases, but she said the landlord’s real leverage was simply refusing to offer her a new lease once the old one lapsed.

Goldstein said Pegasus is part of a much larger pattern of consolidation.

“They’re an acquisition firm,” she said. “They find old owners, buy them out; it’s happening everywhere.” 

Both Goldstein and Rodan said the number of women-owned businesses displaced along the same corridors isn’t incidental.

Women own about 20% of all businesses in the Los Angeles region, according to the Los Angeles County Economic Development Corporation, but LAEDC’s own research found those businesses disproportionately lack the “financial health, resources, and workforce” to weather a shock such as a sudden rent increase that a larger firm could absorb.

“A lot of the businesses on York being kicked out are women-owned,” Roden observed. “Small retail tends to be run by women. Most of my neighbors on this block are women.”

Goldstein went further, tying it to how women are treated when they push back.

“It’s easier to be predatory to a woman in every way, because there’s such a stigma against standing up for yourself,” she said. “We’re so used to having our world taken from us that we just say, ‘OK, I’ll figure it out.”

‘Harassment and coercive leasing tactics’

Los Angeles City Councilmember Ysabel Jurado, who previously worked as a tenant rights attorney, has argued that tax rules can create an incentive for landlords to keep commercial spaces vacant. Owners of multiple properties may be able to claim an empty unit as a loss rather than lower the rent to keep a small-business tenant.

“That’s the perverse incentive of having a vacancy,” Jurado told the Los Angeles Times.

That analysis is now moving toward policy. On April 22, 2026, Jurado, along with Councilmembers Eunisses Hernandez and Heather Hutt, introduced a motion to explore a first-of-its-kind Commercial Tenant Anti-Harassment Ordinance for Los Angeles, modeled on the city’s existing residential Tenant Anti-Harassment Ordinance.

“Small businesses are part of what makes our neighborhoods feel like home,” Jurado’s office said in an official press release. “We are seeing local businesses, many of them family-run and immigrant-owned, pushed out not because they’re failing, but because of harassment, sudden rent increases and coercive leasing tactics that exploit a lack of protections. Small businesses should not be forced out simply because they lack the power to fight back.”

If approved, the motion directs city departments to study a Commercial Tenant Anti-Harassment Ordinance that would include enforcement mechanisms, accountability measures and a private right of action for affected businesses, closing at least part of the gap that left Roden and Goldstein with no recourse. 

The ordinance, known as TAHO, remains in committee. The City Council is on summer break. 

In the meantime, Roden worries her neighborhood is losing the mom-and-pop shops that made it.

“Sip Snack was open to serve the families in the neighborhood,” she lamented. “[Community members] could walk to my store, buy milk, buy eggs, buy a popsicle for their kid, and go across the street to the park. There was a whole vision behind it: people staying out of their cars, being part of their own neighborhood.”