Changes to Security Deposit Caps

Security Deposits are a vital tool for landlords to ensure they have financial recourse for a tenant who vacates their property: 1) With unpaid rent, 2) With damage (beyond normal wear and tear), or 3) in need of cleaning.

Existing law for Security Deposit caps.  Historically, Security Deposit Caps are two months’ rent for unfurnished units and three months for furnished units (Military tenant’s Security Deposits are capped at one time the rent amount).

What is included as a “Security Deposit” Under the law?  Security Deposit caps apply to the combined totals of the Security Deposit, Pet Deposit(s), Last Month’s… everything other than the first month’s rent.

The New Law:  Effective July 1, 2024, the maximum allowed Security Deposit will be changed significantly under AB 12 (Author, Haney - Democrat). The new law reduces the permitted Security Deposit cap to one month’s rent - for both furnished and unfurnished units.

Some landlords are exempt:  small landlords, defined as natural persons owning no more than two residential rental properties, consisting of 4 doors or less, are exempt and may still charge up to two months’ rent (unfurnished) or three times rent (furnished). 

Examples of EXEMPT property owners: 

• 1 house and 1 duplex. 
• 1 house and 1 house with an ADU
• 1 4-plex. 
• 1 home and one condo. 
• 2 duplexes. 

Examples of NON-EXEMPT property owners: 

• 1 four-plex and 1 house
• An apartment complex   
• A duplex and a triplex 

Grandfathered Rental Agreements: Property owners who are already holding a deposit of more than one month’s rent are grandfathered in and will not owe a partial refund of the Security Deposit July 1, 2024, when the new deposit caps become law.  Any rental agreements entered into after July 1, 2024 must comply with the more restrictive security deposit cap (unless the property owner is exempt).

How are Professional Property Managers addressing the new Security Deposit Cap limits?  Many Property Management companies are reducing Security Deposit to 1x rent for all their properties because it is easier and so they don’t make a mistake about who is, or is not, exempt.  Tiner Property Management is surveying all of our property owners to determine which owners are exempt so that we may charge a larger Security Deposit that is allowed for exempt properties.  The Sacramento market forces have allowed us to be competitive charging Security Deposits of 1 months’ rent +$500 for most properties.