How Does The Change To California’s Security Deposit Law Help You?
By Aser G. Tolentino, Esq.
On July 1, 2024, Assembly Bill 12 (commonly referred to as AB12) took effect, changing the language of California Civil Code § 1950.5 in several essential ways. As previous newsletters and blog posts have explained, this part of California state law controls the size of a security deposit a landlord may require from a tenant and limits how that money is to be used. This change in the law has some benefits for those with the most difficulty moving out of an inadequate housing situation. Still, some consequences may be worth considering as you decide who might be holding your next security deposit.
The Benefits of the New Law
From July 1, any California tenant who enters into a new rental agreement for a residential unit, with some exceptions described below, will need less money to move in. Landlords may only require one month’s rent as a condition of renting most of the apartments in the state. Specifically, the only units for which a landlord may continue to charge two months’ rent as a security deposit are those where the landlord is a natural person or is a limited liability company whose members are all natural persons and who only rents out no more than two properties which between them have no more than four units. This means that if a landlord owned three single-family homes, an apartment building with five units, or a duplex and a triplex, they would have to accept only one month of rent as a security deposit regardless of whether they were a natural person. Similarly, even if a limited liability company owned only one single-family home and its members included a corporation or other business entity, they would also be required to accept a single month’s rent as a security deposit. On the other hand, if a trust with a living person as its beneficiary or an LLC made up of only natural persons as members, even if there were a hundred of them, they could have two duplexes and require two months of rent for an unfurnished unit or three months of rent for a furnished unit as a security deposit.
The most significant benefit of this law is that moving into a new home costs less. Often, tenants enduring impossible living conditions have no choice but to stay because they are living paycheck to paycheck and lack the ability even to save or borrow funds to raise a security deposit eventually. Though this can still be a considerable challenge to a tenant, it is far more manageable than before July. If a tenant must move out moving forward, this also can mean they risk leaving behind a smaller deposit that a landlord could withhold in bad faith.
A Double-Edged Sword?
While the benefits are relatively straightforward, this change in the law could have unintended consequences. With less money to deduct expenses from, landlords may find it more attractive to go after tenants in small claims court for the cost of cleaning and repairs. A smaller deposit could also reduce a tenant’s leverage when raising the possibility that a court might award double the deposit in damages for the landlord acting in bad faith. Another common practice is rental concessions, like two months of free rent, which must be repaid if tenants move out early. This can create new barriers to overcome if they experience uninhabitable conditions at some point before the end of their lease term.
Conclusion
The need to come up with as much as four months’ rent—one for actual rent plus three for a deposit for a furnished unit—often made it impossible even for people with higher incomes to move, let alone those struggling to make ends meet. In that sense, there is no denying that this change in the law will make a tremendous difference for many Californians. As the industry has adapted in strange and sometimes troubling ways to new rules, it will be necessary to be mindful of any new practices that arise in response to this reform. In the end, it is always important to remember the need to carefully review the rental agreement and be sure of its terms, as well as confirm the condition of a rental unit at move-in and document any issues from start to finish. If you have questions about any part of this process, attorneys experienced in tenant law, like those at Tenant Law Group, are a good resource for avoiding any unwelcome surprises.
