California Security Deposit Law Change 7/1/24: What You Need To Know

Commentary: Are California lawmakers pandering to the tenant community for reduction of move-in costs? Traditionally landlords could charge a security deposit of no more than 2 times the rent for an unfurnished unit and no more than 3 times the rent for a furnished unit. These amounts served as maximum limits and the market or risk assessment of the tenant would determine the actual security deposit.

However, after July 1, 2024 the limit is reduced to one month of rent. There are exceptions: for landlords who own no more than two residential properties that include no more than four total units for rent, the limit is two times the rent — but only if the landlord is a natural person or a limited liability company in which all members are natural persons.

AB 12 amends Civil Code 1950.5.

Impact on landlords: It puts a much greater burden on a rigorous screening process. The cost of evicting a tenant is 2–3 months of time to get a court hearing, attorney fees and repair costs, so landlords will emphasize high quality applicants to minimize risk.

Impact on tenants: The chances of a prospect with a marginal credit score finding housing just got more difficult. Since landlords can no longer offset risk with a higher, refundable security deposit, rent prices are sure to increase to offset the risk. The unintended consequences of this act will severely affect the less-than-perfect credit score prospect that is already struggling to find housing.

This was a partisan bill (Democrat 15-0).

What appears to be a tenant-friendly bill inadvertently just increased rental housing cost and made it nearly impossible for the less-than-perfect credit score tenants to obtain housing.

Let County Property Management be your trusted partner in screening prospects in Ventura County, CA. We'll provide you with the detailed information needed to make an informed decision and minimize the risk.