(a) The Legislature finds and declares:

(1) It is the public policy of the state and fundamental to the commerce and economic development of the state to enable and facilitate freedom of contract by the parties to commercial real property leases.

(2) The parties to commercial real property leases must be able to negotiate and conduct their affairs in reasonable reliance on the rights and protections given them under the laws of the state.

(3) Until the case of Kendall v. Ernest Pestana, Inc., 40 Cal. 3d 488 (1985), and its predecessor, Cohen v. Ratinoff, 147 Cal. App. 3d 321 (1983), the parties to commercial real property leases could reasonably rely on the law of the state to provide that if a lease restriction requires the landlord’s consent for transfer of the tenant’s interest in the lease but provides no standard for giving or withholding consent, the landlord’s consent may be unreasonably withheld.

(4) The Kendall and Cohen decisions reversed the law on which parties to commercial real property leases executed before September 23, 1983, the date of the Cohen decision, could reasonably rely, thereby frustrating the expectations of the parties, with the result of impairing commerce and economic development.

(b) Section 1995.260 applies to a restriction on transfer executed on or after September 23, 1983. If a restriction on transfer executed before September 23, 1983, requires the landlord’s consent for the tenant’s transfer but provides no standard for giving or withholding consent, the landlord’s consent may be unreasonably withheld. For purposes of this subdivision, if the terms of a restriction on transfer are fixed by an option or other agreement, the restriction on transfer is deemed to be executed on the date of execution of the option or other agreement.

(Added by Stats. 1989, Ch. 982, Sec. 2.)