Landlords use their financial resources or credit history to acquire real property. They can then monetize that property by renting it out to others. Of course, residential tenants occupying a home, duplex or apartment can potentially damage the property while living there or when vacating the premises at the end of their tenancy.
Landlords often try to protect themselves from financial losses by collecting a security deposit. That way, if the tenant damages the property, they have funds immediately available to pay for necessary repairs. State rules on security deposits recently changed. Landlords signing new leases need to be aware of the new restrictions on residential security deposits.
Strict limits apply to security deposits
Previously, landlords could charge varying security deposits depending on whether they provided furnished or unfurnished residential units. Landlords renting unfurnished units could require up to two months’ rent as a security deposit. Those providing furnished units could request up to three months’ rent as a security deposit before the tenant took occupancy of the property.
That changed as of July 1st, 2024. A new California law enacted by the legislature and signed by the governor in 2023 now restricts all security deposits to one month of rent. Regardless of whether the landlord runs a furnished or unfurnished unit, they can only request a security deposit equivalent to one month of the standard rent required from the tenants. There are exceptions for landlords with no more than two rental properties.
The aim of this new rule was to make rental housing more accessible to tenants and to limit what they might lose after moving from one rental home to another. Unfortunately, this new regulation puts landlords at risk of tenants causing major damage to a property that they cannot recoup using the security deposit alone.
Landlords signing new leases after the law took effect may need to be proactive about screening their tenants to identify those who have a history of damaging rental properties. They may also need to pursue litigation in scenarios where tenants cause substantial damage to a unit that costs more to repair than the landlord can recoup by making a claim against the security deposit.
Understanding how changing laws in California may influence the outcome of landlord-tenant disputes can help property owners protect themselves. Those who have questions about their rights can seek legal guidance at any time.
