California Residential Landlords Face New Security Deposit Restrictions

California Residential Landlords New Security Deposit Restricitons Laguna Beach Property Manager

California Residential Landlords Face New Security Deposit Restrictions

California’s residential landlords are set to face new restrictions on security deposits. Currently, they are limited to charging a maximum of two months’ rent for unfurnished properties and three months’ rent for furnished ones. However, starting July 1, 2024, landlords will be prohibited from demanding or receiving security deposits exceeding one month’s rent, regardless of the property’s furnishings (Calif. Civil Code §1950.5(c)).


There is an exception for natural persons or limited liability companies (LLCs) consisting solely of natural persons who own no more than two residential rental properties with a total of four rental units. In such cases, landlords may collect a security deposit equal to two months’ rent (CC §1950.5(c)(4)).

An additional exception applies to servicemembers, barring landlords (including mom-and-pop landlords) from charging more than one month’s rent for an unfurnished unit or two months’ rent for a furnished unit. Furthermore, landlords cannot refuse to rent to a servicemember due to these security deposit restrictions (CC §1950.5(c)(2)).

Prepaid Rent

In conjunction with security deposits, landlords are limited to collecting prepaid rent equivalent to the first month’s rent. However, if a lease agreement spans six months or more, landlords may collect no less than six months’ prepaid rent (CC §1950.5(c)(2)). It’s important to note that upfront rent is designated for rent-related costs and cannot be used to cover expenses covered by the security deposit, such as reimbursing landlords for tenant conduct expenses, unpaid rent, maintenance, and returning the premises in the same condition as initially leased, minus ordinary wear and tear.

Refundable Security Deposit

Landlords often attempt to disguise refundable security deposit funds with names like “nonrefundable deposit” or “cleaning charge.” However, any funds exceeding the first month’s rent, screening fees, and waterbed administrative fees, regardless of how they are labeled, fall under the category of security deposits and are subject to the specified limits (CC §§1940.5; 1950.5(b), (c); 1950.6).

Reasonable deductions from a tenant’s security deposit include unpaid rent, recoverable costs for repairing damages caused by the tenant, cleaning costs to restore the premises to its initial cleanliness, and costs to replace or restore furnishings as agreed upon in the lease (CC §§1950.5(b); 1950.7(c)).

Landlords failing to comply with security deposit refund requirements in bad faith may face statutory penalties of up to twice the security deposit amount. Additionally, they are liable for the tenant’s actual monetary losses resulting from the wrongful retention of security deposits (CC §1950.5(l)).

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For inquiries about landlord laws or any other aspects related to your rental property, feel free to reach out to Laguna Beach Property Manager at your earliest convenience.

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