Smile. Your property’s before-and-after condition will be on camera.
In 2025, there will be increased transparency when it comes to security deposit accounting.
Time is flying by. It seems like yesterday we were talking about new laws for rental housing providers to follow in 2024, but now forward-thinking landlords need to keep their eyes on what 2025 will hold.
Governor Newsom recently signed a trio of housing bills. Let's review one relating to security deposits. You should have gotten the memo by now that with certain exceptions, security deposits are limited to one month's rent, but now lawmakers have meddled further with security deposit rules.
The new subsection of Civil Code section 1950.5 requires landlords to photograph the rental unit immediately before a tenant moves in, at the end of the tenancy, and before and after any necessary repairs or cleaning. Interestingly, there are two components to this.
Pre-move-in photographs: This applies to tenancies commencing on or after July 1, 2025.
Pre-repair and post-repair photographs: This law goes into effect starting April 1, 2025.
Generally speaking, we have always been sticklers for taking photos to document the "before and after" condition of the property. Ordinarily, we would advise clients to be thorough in their security deposit accounting, taking into account what constitutes damage and what is "normal wear and tear." This can be an ambiguous term, but we've provided some guidance in this handy and clickable PDF that provides a framework on what can be deducted.
The law also puts an exclamation point on the fact that the cost of cleaning services cannot be deducted from the security deposit except when it is reasonably necessary to restore the unit to its original condition at the inception of the tenancy.
Our takes
We have had a cursory glance at the new law and agree that there should be transparency in security deposit accounting. Yet a staggering number of landlords and property managers do not get it right. We're amazed that while every landlord knows how to take a security deposit, comparatively fewer know what to do with it when the tenant vacates.
Under existing rules surrounding security deposits, there is ample opportunity for tenants to sue the landlord. If it is demonstrated that the landlord withholds the security deposit in bad faith, the penalties can exceed the amount of the security deposit. That's right - when housing providers hoard the security deposit, they could be penalized above and behind the dollar amount the tenant paid.
The new law adds a new layer of procedural requirements to security deposit accounting to those who may be already misinformed.
So, let's say 80% of landlords violate existing security deposit rules. Whatever the number. Suffice it to say that we know that many in our community are not using the best practices or following the law germane to security deposits. But enter more regulations.
Now, an already naïve group of housing providers not familiar with current law will be subject to an even stricter regulatory regime, which means there will be a swelling sea of landlords who may be in violation of the law.
By maintaining a professional relationship with Bornstein Law, owners can stay compliant with the law, cauterize risk, and ensure that there is no insecurity in security deposits.