LEGAL UPDATE: Security Deposit Law Has Changed In California

LEGAL UPDATE: Security Deposit Law Has Changed In California

Beginning July 1, 2024, a landlord may collect only one month's rent in addition to the first month's rent.  There is no exception for furnished units.  But there is a carve-out for "small landlords."  Small landlords can collect two months' rent as security deposit plus the first month's rent, again without regard to whether the property is furnished or unfurnished.  

What exactly is a small landlord?  A small landlord is a "natural person" who owns no more than two residential rental properties that together include no more than four units.  For example, a landlord who owns one single-family property and one triplex is a small landlord.  A family trust can qualify as a small landlord, as well as an LLC, as long as every member of the LLC is a natural person.  Even for small landlords, if the prospective tenants is a service member, the security deposit is limited to one month's rent.

What about currently held security deposits in excess of one month's rent?  Landlords who currently hold a security deposit or those who demand or collect a security deposit in excess of one month's rent prior to July 1, 2024 may continue to retain the security deposit even though it is more than one month's rent.

The above excerpt was taken from CAR's California Real Estate Q1/Winter 2024 Magazine.