A newly minted law aims to reduce barriers to housing, limits security deposits to one month’s rent

Governor Newson has spent the week assessing dozens of laws that sailed through California’s legislature, approving many measures or wielding the veto pen when others crossed his desk.

One bill that Newsom gave the nod to is AB 12, a landmark piece of legislation that limits security deposits to one month’s rent. The law, which will go into effect July 1, 2024, makes no distinction between furnished and unfurnished units.

This upends current law that allows landlords to charge up to two months’ rent for an unfurnished unit and three months’ rent for a furnished one. There were exceptions for military personnel, as we explained here. There continues to be no limitations on security deposits for commercial tenancies.


What about small landlords? 

We count many mom-and-pop landlords as our valued clients and can report to those small landlords that they are permitted to collect up to two months’ rent as a security deposit if they own no more than two residential properties that collectively include no more than four units offered for rent, with another caveat: the ownership must be held by a natural person, an LLC in which all members are natural persons, or in a family trust.


Now is a good time to get acquainted with security deposit rules.

All rental housing providers know that they can collect a security deposit at the beginning of a tenancy yet a staggering amount of landlords do not know what to do with the security deposit when the tenant vacates.

It used to be that disgruntled tenants would take landlords to small claims court, the former tenant prevails, and the landlord is on the hook for the amount of the security deposit. Now, however, we see enterprising attorneys suing for emotional distress and seeking damages that are a multiple of what the amount of the security deposit is.

If there are discrepancies in your security deposit accounting, please get them in order and if there are any questions, certainly reach out to Bornstein Law.