California's New Security Deposit Legislation: What You Need to Know

As of September 15, 2023, California is close to implementing significant changes to its security deposit laws. The state legislature has passed Assembly Bill 12 (AB 12), a piece of legislation sponsored by Assemblyman Matt Haney, D-San Francisco. AB 12, which is currently awaiting the governor's signature, would limit security deposits for both furnished and unfurnished rental units to a maximum of one month's rent. This is a big shift from existing law, which currently allows landlords to charge up to two months' rent for unfurnished units and three months' rent for furnished ones.

Current Law vs. Proposed Changes

Presently, California landlords can request a security deposit of up to two months' rent for unfurnished units and three months' rent for furnished ones. AB 12 aims to standardize this practice, ensuring that all tenants are only required to pay a security deposit equivalent to one month's rent, regardless of whether the unit is furnished or unfurnished.

Exceptions for Small Landlords

AB 12 recognizes the unique challenges faced by small landlords and makes allowances for them. Under the proposed legislation, small landlords can still collect a security deposit of up to two months' rent. To qualify for this exception, landlords must meet specific criteria:

• They must be either a "natural person," a limited liability company, or a family trust.
• They should own no more than two residential rental units.
• Their rental properties, collectively, must include no more than four dwelling units offered for rent.

* It's important to note that this exception does not apply when the prospective tenant is a military service member.

Timeline for Implementation

Assuming Governor Newsom signs AB 12 into law, it won't take immediate effect. The new security deposit rules are slated to come into force on July 1, 2024. This grace period allows landlords and tenants ample time to adjust to the changes and ensures a smooth transition.

What This Means for Landlords

Landlords, especially small-scale property owners, should also take note of these impending changes. While the bill accommodates small landlords with the option to charge up to two months' rent as a security deposit, it's essential to review your property portfolio and ensure compliance with the criteria outlined in the legislation. Understanding these criteria and potential exemptions will help landlords navigate the evolving rental landscape.

Stay tuned for updates as we await the governor's decision on this crucial piece of legislation.

Our offices at Southern California Apartment Group and Shant Sherbetdjian would be happy to provide you with more insight on the proposed changes. Be sure to give our office a call at, 626-657-8150, to discuss further.

Sincerely,

Shant Sherbetdjian

Southern California Apartment Group