It’s been a busy few months in California when it comes to landlord-tenant laws. There have been a lot of updates that are essential for landlords to understand and implement to ensure they stay compliant with state law.
Significant changes to California laws have occurred, from changes in rent increases and security deposits to how you handle security deposits. To keep you informed, we’re sharing the three biggest updates that came into effect in the second half of 2024 and breaking down what they mean for you as a rental property owner.
Assembly Bill 12 and Security Deposit Caps
Assembly Bill 12 (AB12) has created some significant changes to how California landlords manage security deposits for their rental units. The bill came into effect on July 1, 2024, and sets strict limits on how much landlords can charge as a security deposit.
Under AB12, landlords can only collect a maximum of one month’s rent as a security deposit. Before this bill, California landlords could collect two months’ rent for unfurnished properties and three months for furnished rentals.
AB12 aims to standardize the security deposit process across different types of rentals and alleviate potential financial burdens for tenants. It’s important to note that landlords are still protected in case of excessive damage to the property—they can still seek damages beyond the security deposit in case of damage caused by the tenant. This ensures landlords aren’t being financially penalized by the new bill.
The unintended consequences of AB12
While this law was created with the best intentions, it’s largely unnecessary. Most housing providers—including Good Life Property Management—typically charge only one month’s rent as a security deposit.
The primary exception has been conditional approvals, for which we charge 1.5x the deposit. Conditional approval is when an applicant meets some of the landlord’s standards but does not meet the requirements in other aspects of their application. For example, a landlord might think an applicant would make a good tenant, but their credit history might need further review or be at a lower level than they’d normally look for. Conditional approval is subject to change following additional checks.
Because AB12 caps security deposits at one month, many housing providers have had to eliminate their conditional approval programs that allowed for slightly higher deposits for marginal credit risks. This unintended consequence of AB12 actually hurts the very tenants it aims to protect. Tenants with lower credit or income will have a more challenging time getting approved for housing because of the elimination of conditional approval programs.
Handling Security Deposits Under Assembly Bill 2801
Assembly Bill 2801 (AB2801) will also come into effect in July 2025. This legislation sets out new requirements for handling security deposits, ensuring fair practices from Housing Providers.
There are three main elements to AB2801 that all California landlords should be aware of before it comes into effect:
- You are now legally required to take before-and-after photos of your property. You cannot wing it or rely on a move-in/move-out checklist—it must be accompanied by detailed photographs of the property.
- You cannot charge an automatic cleaning fee for anything from carpets to the whole rental. Landlords can only charge cleaning fees if it’s absolutely necessary to restore the property to its original move-in condition.
- If a tenant requests a pre-move-out inspection, you are required to perform one. You must provide an itemized list of any damage found during the inspection, and you can only charge for items on that list.
While it’s important to know these updates, most of the above points are already things that good landlords do by default. But because tenants can claim up to 3x of the deposit amount for wrongful deductions, it’s essential to stay compliant with the new changes as of July 2025.
Deducting from a security deposit
It’s important to understand when you can deduct from a deposit when handling security deposits. You cannot simply deduct because the property has normal wear and tear. There are three main reasons to deduct from a security deposit:
- To cover the costs of fixing property damages your tenants or guests caused, not including normal wear and tear.
- Cleaning costs to bring your property back to its move-in state. Remember, under AB2801, this cannot be an automatic charge and must be on a case-by-case basis.
- Unpaid rent.
If you deduct any amount from the security deposit, you must provide your tenant with an itemized list of the deductions with receipts within 21 days of your tenant’s move-out date. If repairs aren’t completed within 21 days, landlords can provide tenants with estimates and follow up with receipts within 14 days of completing the repairs.
Returning a security deposit
When a tenancy ends in California, landlords have 21 days to return a tenant’s security deposit fully. If you are not returning the total amount, you must give your tenant the following:
- A written letter explaining what you are withholding and why.
- An itemized list of every deduction.
- A refund of the remaining deposit.
- Copies of receipts/estimates for the deductions.
Changes to Rent Increase Limitations
As of August 1, 2024, there are new rent increase limitations in effect that must be followed in California. Landlords in California are bound to California’s Tenant Protection Act (AB 1482), which regulates how much landlords can raise rent for their rental properties. The statewide limit on rent increases is set at 5% plus the Consumer Price Index (CPI) for your region.
For example, in Orange County, the current CPI rate is 3.8%. Your tenant’s maximum increase could be 3.8% (inflation rate) plus 5% (base rate) for an 8.8% rental increase.
Often, landlords stick to a standard rent increase of 10%—do not continue with this practice as of August 1, 2024. For a sub 2% error, you could find yourself dealing with a very expensive lawsuit. It’s crucial to know these limits to avoid potential legal issues down the road.
Landlords must also give tenants written notice 30 days before rental increases occur.
As always, be sure to look into your local regulations as well. For example, Los Angeles and San Francisco have implemented rent control measures beyond those at the state level.
Never Miss Another Landlord-Tenant Legislation Update Again
At Good Life Property Management, we believe life should be enjoyed, not spent sweating the small stuff. That’s why we set out to make property management easy. From keeping your property up-to-date with the latest legislation to maintaining your property, we care about you, your property, and your tenant. And we do it all so you can Live the Good Life.
Schedule a call to speak with one of our Good Life experts.
Landlord Tenant Legislation FAQs
What is the new law on security deposits in California?
Assembly Bill 12, which came into effect on July 1, 2024, is California legislation that requires landlords to charge a security deposit of one month’s rent. There are some exceptions, but most landlords are required to follow this legislation.
What can a landlord legally deduct from a security deposit in California?
Landlords can only deduct the costs of fixing property damages caused by their tenants or their guests, not normal wear and tear, cleaning costs to restore the property to its move-in state, or unpaid rent.
What is considered normal wear and tear in a California security deposit?
Normal wear and tear in California is considered minor scratches, faded paint, faded hardwood flooring, stained bathroom fixtures, and other small, superficial issues that result from a property’s typical usage.
What is the maximum rent a landlord can raise in California?
As of August 1st, 2024, the statewide limit on rent increases is set at 5% plus the Consumer Price Index (CPI) for your region. The new CPI for San Diego is 3.6%, and for Orange County, it is 3.8%.
Steve Welty
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