A California law limiting security deposits to one month’s rent for both furnished and unfurnished units took effect today, July 1.

The legislation, AB 12 by Assemblyman Matt Haney, D-San Francisco, was signed into law by Gov. Gavin Newsom in October 2023. It marks a significant change from previous regulations, which allowed landlords to charge up to two months’ rent for an unfurnished unit and three months’ rent for a furnished one, except where the tenant was a service member.

The new law includes an exception for certain small landlords. Property owners with no more than two residential rental properties, collectively including no more than four dwelling units offered for rent, may still collect up to two months’ rent as a security deposit. To qualify for this exception, 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.

This small-landlord exception does not apply when the tenant is a military service member.

“It’s crucial for landlords across California to understand and comply with these updated security deposit regulations,” said Whitney Prout, executive vice president of legal affairs for the California Apartment Association. “We strongly encourage all CAA members to review our updated security deposits background paper, which reflects the changes brought by AB 12. This resource is designed to help our members navigate this significant change and ensure they’re operating within the bounds of the new law.”

To further assist landlords in understanding and implementing the new law, CAA will host a webinar on July 30 titled “Security Deposits Ins and Outs.” The webinar will cover key requirements of the law, including the recent changes, maximum allowed security deposits, permissible deductions, the walkthrough process, and return requirements.