Effective July 1, 2024, California residential landlords will generally only be able to charge security deposits equal to one month’s rent with some exceptions for smaller landlords. This is pursuant to Assembly Bill 12 approved in 2023 by California Gov. Gavin Newsom, which amends California Civil Code Section 1950.5.

While former law distinguished between furnished units (for which landlords could charge a three-month security deposit) and unfurnished units (for which landlords could charge a two-month security deposit), the new law limits security deposits for furnished and unfurnished units alike.

A limited exception under the new law allows landlords to charge up to two months’ rent if they: (a) are a natural person or limited liability company in which all members are natural persons; and (b) own no more than two residential rental properties that together include no more than four rental dwelling units.

However, this “small landlord” exception will not apply (and a landlord can only charge a security deposit equal to one month’s rent) if the tenant is a “service member” (a member of: (1) the active militia (the National Guard, State Guard and the Naval Militia) or the unorganized militia), called or ordered into active state or federal service; or (2) an active or reserve component of the Armed Forces ordered into active duty under federal law).

Notwithstanding the new law, landlords may still require tenants to prepay “not less than six months’ rent if the term of the lease is six months or longer.”

Landlords and property managers of California residential properties alike should be sure to review their security deposit collection practices going forward to ensure compliance with the new law.