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New Security Deposit Limits For California Landlords

California Security Deposits: Understanding the New Law Effective July 1, 2024

As a landlord or tenant in California, one common question is how much can be collected as a security deposit. Traditionally, the maximum has been two months' rent for unfurnished properties and three months' rent for furnished properties. However, this is changing with a new law effective July 1, 2024.

Recent headlines have sparked confusion by suggesting that California will limit security deposits to one month's rent under the new law signed by Governor Newsom. This isn't the whole story. While it's true that there are new limits, they come with important exceptions.

The Basic Rule

Starting July 1, 2024, the general rule is that security deposits are limited to one month's rent. This is a significant change from the previous allowance of two or three months' rent. However, this rule isn't universal.

The Small Landlord Exemption

Here's where the confusion lies: the new law includes an exemption for small landlords. If you own no more than two residential rental properties, which collectively include no more than four units, you can still charge up to two months' rent as a security deposit. This exemption applies as long as the landlord is a natural person or an LLC where all members are natural persons.

Key Points to Remember

  1. One Month's Rent Limit: This applies to most landlords starting July 1, 2024.
  2. Two Months' Rent for Small Landlords: If you meet the small landlord criteria (no more than two properties with a total of four units), you can still charge two months' rent.
  3. No Three-Month Limit: Under the new law, no landlord can charge three months' rent, even for furnished units.

Advice for Landlords and Tenants

For landlords, especially small ones, it's crucial to verify whether you qualify for the exemption. Tenants should also be aware of these rules to understand their rights and obligations. In any case, consulting with a legal professional about your specific situation is always a good idea.

Disclaimer: This article is not legal advice. Always consult with an attorney for your specific situation.