California legislation that limits security deposits to one month’s rent for both furnished and unfurnished units was signed into law Wednesday by Gov. Gavin Newsom.

The bill, AB 12, was authored by Assemblyman Matt Haney, D-San Francisco; it passed both the Senate and the Assembly houses in September. The legislation introduces a notable shift from existing law, under which landlords can charge up to two months’ rent for an unfurnished unit and three months’ rent for a furnished one.

The law does make an exception for some small landlords, as defined, if they own no more than two residential rental properties that collectively include no more than four dwelling units offered for rent.  In addition to owning a limited number of units, the owner must hold the property as a natural person, a limited liability company (in which all members are natural persons), or as a family trust. Under these conditions, small landlords are permitted to collect up to two months’ rent as a security deposit.

This exception does not apply when the prospective tenant is a military service member, however.

The law won’t take effect until July 1, 2024, providing landlords time to make the necessary adjustments. CAA will provide compliance materials and updated forms prior to the effective date of AB 12.