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Navigating California's New Security Deposit Law 2024: What Landlords Need to Know

by American Stages Realty & Management, INC.

California's rental landscape is set for a change with the implementation of Assembly Bill 12 (AB12), impacting how landlords can collect and use security deposits. As of July 1, 2024, the rules around security deposits are evolving, particularly concerning the amount landlords can collect and the allowable uses for these deposits.

Understanding the Changes:
Previously, landlords in California had the flexibility to collect up to 2x the rent for an unfurnished unit or 3x for a furnished one. However, under AB12, a significant adjustment is being made – landlords are now restricted to collecting a maximum of 1x the rent. This shift aims to provide tenants with more financial flexibility while maintaining a fair balance between landlord and tenant interests.

Permissible Uses for Security Deposits:
AB12 clarifies the acceptable uses for security deposits, emphasizing their intended purpose. Landlords can utilize these deposits for:

  • Unpaid Rent: Addressing any outstanding rent owed by the tenant, excluding late fees.

  • Property Damage: Repairing damage to the premises caused by the tenant, their guests, or licensees, beyond ordinary wear and tear.

  • Cleaning Expenses: Restoring the unit to the same level of cleanliness as when the tenant initially moved in.

  • Future Defaults: Covering potential future defaults by the tenant related to their rental agreement obligations, including the restoration, replacement, or return of personal property, excluding ordinary wear and tear.

Exceptions to the Rule:
While the new law applies broadly, there are exceptions for landlords who are natural persons or LLCs where all members are natural persons. If such landlords own no more than two rental properties, with a total of no more than four units, they will be permitted to charge up to two months' rent – unless the tenant is a service member, in which case the one-month limit still applies.

How American Stages can help you:
As a property management company, we understand the importance of staying compliant with evolving laws. Our team is well-versed in the nuances of AB12 and is ready to assist landlords in navigating these changes seamlessly. From adjusting leasing agreements to providing guidance on lawful security deposit practices, we are here to ensure that property owners remain in compliance while fostering positive landlord-tenant relationships.

The implementation of AB12 signifies a notable shift in California's rental regulations, placing a heightened emphasis on fairness and transparency. By staying informed and seeking support from knowledgeable property management experts, landlords can adapt to these changes seamlessly, creating a rental environment that benefits both parties involved.

Call us today to set up a consultation so one of our experienced agents can provide you with all of the information you need to make an informed decision. 

Brie Camacho 805-345-0677

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