30-Day Limit on Security Deposits Takes Effect July 1, 2024

30-Day Limit on Security Deposits Takes Effect July 1, 2024

Last year’s Assembly Bill 12 (Asm. Haney) imposes a one-month’s rent maximum limit on virtually all future security deposits received on or after July 1, 2024. California is now among 12 states that have imposed one month’s rent limits on security deposits. 

▶ ️The new law prohibits rental housing providers from demanding or receiving security deposits in excess of one month’s rent irrespective of an applicant’s financial status, an applicant’s eviction history, if a tenant has pets, or even if the rental unit is furnished. 

This new law does not apply retroactively.

Under the new law:

▶ If a housing provider has received more than one month’s rent as a security deposit before July 1, 2024’s effective date, the housing provider is not required to refund any portion of the security deposit. Housing providers may not; however, demand or receive any other type of deposit as security such as pet deposit, key deposit, etc. unless the totality of all deposits received as security do not exceed one month’s rent.

▶ The new law does not prohibit advance payment of not less than six months rent so long as the term if the lease is six months or longer. Keep in mind that such a deposit is for rent, and not a deposit that can be used for security by holding until the end of a lease term in case of default or damage to a unit.

Small Owner Exemption:

 There is a small owner exemption for housing providers who meet the following criteria: 

(i) own no more than two rental properties, and

(ii) own no more than four rental units in total. 

In order to take advantage of this small owner exemption, the owner must be a natural person, family trust, or limited liability corporation in which all members are natural persons.