Security Deposits in California and What You Need to Know

Assembly Bill 12 (AB12) is a significant piece of legislation in California aimed at making housing more accessible and affordable by limiting the amount landlords can charge for security deposits. Here's a simple summary that includes the exception for small landlords, along with the effective date of the bill:

What AB12 Does:

• Limits Security Deposits: Starting July 1, 2024, landlords can only charge a maximum of one month's rent as a security deposit for both furnished and unfurnished residential units​​​​​.

• First Month's Rent: Landlords are still allowed to collect the first month's rent in advance​.

Exception for Small Landlords:

• Who Qualifies: Small landlords who are natural persons or have limited liability companies where all members are natural persons, and who own no more than two residential rental properties with a total of no more than four units, can charge up to two months' rent as a security deposit​.

• Service Member Exception: This exception does not apply if the tenant is a service member; in such cases, the landlord can only demand up to one month's rent as a security deposit​.

Why AB12 Is Important:

• Housing Affordability: AB12 addresses the barrier to housing affordability posed by high-security deposits, aligning California with other states that have implemented similar caps​.

• Protection for Landlords and Tenants: The legislation aims to balance the need for tenant affordability with protections for landlords, who can still seek damages if property harm exceeds the deposit amount​.

Effective Date:

• July 1, 2024: Landlords and tenants need to be aware that these new regulations will be in place from this date, allowing time for adjustment to the new requirements​.

This legislation represents a step towards reducing financial barriers for renters, making it easier for many Californians to afford housing. It's designed to offer a fair balance between protecting landlords' interests and making the rental market more accessible to tenants. Landlords, especially those who qualify as small landlords, should prepare for these changes by adjusting their leasing policies and practices accordingly.

The landscape of rental agreements in California is evolving to address the needs of both landlords and tenants. The introduction of this legislation marks a significant step towards creating a more equitable and accessible housing market. It's a move that not only helps to lower the initial financial barrier for renters but also encourages a fairer dialogue between property owners and their tenants.

For any inquiries regarding landlords or tenants, just reach out to me at 818-629-4810, and I'll link you up with our Asset Management Team at JohnHart who are ready to help you with your queries.