New Law on Maximum Security Deposit

July 29th, 2024 at 1:11 pm

This week’s Legal Tip is a reminder that, starting on July 1, 2024, the maximum security deposit that a residential landlord can generally demand is the dollar equivalent of only one month’s rent for either a furnished or unfurnished property. Certain small-time landlords can still collect a security deposit up to 2 months’ rent (furnished or unfurnished) if all of the following 3 requirements are met: (1) The landlord is a natural person, a family trust as defined, or an LLC as long as every LLC member is a natural person; (2) The landlord owns no more than 2 residential rental properties with a collective total of no more than 4 units offered for rent; and (3) The tenant is not an active military service member. 

C.A.R. recently revised its standard-form Residential Lease or Month-to-Month Rental Agreement (RLMM) and Residential Lease After Sale (RLAS) to reflect the new security deposit law. C.A.R. has also drafted a new Security Deposit Disclosure and Addendum (SDDA) to be used for small-time landlords, and active military service members, when applicable.

If a landlord falls under the new one-month max law, the maximum amount of money that can generally be collected upfront is the first month’s rent, plus a security deposit, however denominated, equal to one-month’s rent. A landlord cannot circumvent this law by labeling funds collected upfront as a cleaning fee, pet deposit, last month’s rent, or similar things.

The new law does not affect landlords who already collected or demanded security deposits before July 1, 2024.

Source: The full text of this law is set forth at section 1950.5(c) of the California Civil Code.

-A big thank you for suggesting this week’s legal tip goes to Nick Cacarnakis (Manager of Beverly Hills) and Staci Hughes (Manager of Newport Beach and Corona Del Mar)!

Copyright© 2024 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of July 29, 2024. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals. Written by Stella Ling, Esq.

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