Landlords, except those considered “Mom and Pop” landlords, will have tenant security deposits capped at one month’s rent, down from the current law’s limit of two months for unfinished units, three months if they’re furnished, starting in July. These amounts don’t include the first month’s rent. The new law makes no distinction based on furnishings.
California’s current security deposit limit for unfurnished apartments began in 1977, according to the San Francisco Chronicle. Since then, the median rental price of a California one-bedroom apartment increased by about 673%. Eleven states and Washington, D.C., have security deposit limits.
Affordability vs. Landlords’ Financial Stability
Supporters claim higher security deposit payments are barriers to people trying to find affordable housing, especially in cities where rent is more expensive, reports the Los Angeles Times. While being debated by the legislature, those against the proposal stated landlords take risks in renting out their homes, and a reduced security deposit may not be enough to cover damage caused by tenants. As a result, fewer units may be put on the market.
The new law won’t prevent landlords from seeking damages from tenants if repairing the damage they caused is greater than the security deposit. But suing a tenant for damages and collecting on a verdict is more complex and expensive than withholding money from a larger security deposit.
“Mom and Pop” Exception to the New Rule
Two months’ rent can be demanded from prospective tenants, according to the state legislature, unless they’re military service members if the landlord:
- Is a natural person or a limited liability corporation whose members are natural persons and
- Owns no more than two residential rental properties that have more than four units for rent in total
This section of the law was added to the bill while it was in the legislature and added support to the proposal.
What Does This Mean for Me?
The median rent in Orange County is $2,850 a month, according to Zillow. Starting next July, if the unit’s unfurnished, instead of demanding a $5,700 security deposit, you’ll have $2,850 to repair damage or cover unpaid rent. If you fall into the new law’s exception, you’ll continue to have a two-month security deposit.
We’re Here to Help
If you’re a residential landlord and have questions about security deposits or you’ll need representation in related litigation, call the team at AWB Law, P.C. at (949) 244-4207 or complete our online contact form today.
