Everything Landlords Must Know About AB 12

AB 12 marks a significant shift in California’s residential rental landscape, ushering in a new era of tenant protections and reshaping the rules surrounding security deposits. This groundbreaking legislation, signed into law by Governor Gavin Newsom and championed by Assemblyman Matt Haney, a Democrat, aims to alleviate financial burdens on tenants while promoting more equitable leasing practices.

New Changes in AB 12

Under the previous legal framework, landlords in California were permitted to collect a security deposit equivalent to two months’ rent for unfurnished units and up to three months’ rent for furnished units. AB 12, slated to take effect on July 1, 2024, brings about a substantial reduction in the maximum allowable security deposit.

Specifically, the new law stipulates that landlords can now only demand a security deposit up to the equivalent of one month’s rent for residential rentals. This amendment, enshrined in Civil Code 1950.5(c)(1), seeks to strike a balance between protecting landlords’ interests and ensuring that tenants are not burdened by exorbitant upfront costs when securing housing.

The implementation of this law is poised to have far-reaching implications, particularly for renters who have historically faced challenges in accumulating the substantial funds required for security deposits. By capping the security deposit at a more reasonable level, AB 12 aims to enhance housing affordability, making it easier for individuals and families to access and maintain rental properties.

Assemblyman Matt Haney, as the author of AB 12, has played a pivotal role in advancing tenant rights and addressing concerns related to housing affordability. The legislation reflects a commitment to fostering a more tenant-friendly environment and fostering a balance between the interests of landlords and the growing need for affordable and accessible housing in the state.

As California continues to grapple with housing shortages and affordability issues, AB 12 stands as a progressive step toward creating a more inclusive and fair rental market, one that prioritizes the financial well-being of tenants while maintaining a fair playing field for property owners. The law’s effective date in 2024 provides stakeholders, including landlords and tenants, with time to adapt to the forthcoming changes and ensures a smoother transition to the new security deposit regulations outlined in AB 12.

Exceptions to AB 12

AB 12 establishes specific conditions under which a landlord can request a security deposit of up to the equivalent of two months’ rent. To qualify for this exception, the landlord must meet the following criteria:

Nature of the Landlord

The landlord must be either a natural person or a limited liability company (LLC) where all members are natural persons. This implies that the exception is not applicable to corporate entities or other types of business structures.

Property Ownership Criteria

The landlord should own no more than two residential rental properties. This restriction is in place to limit the application of the exception to smaller-scale landlords.

The total number of dwelling units across all owned properties should not exceed four. This further emphasizes the focus on landlords with a relatively small number of rental units.

Statutory Reference

The legal basis for these conditions is specified in Civil Code 1950.5(c)(4), which is part of the California Civil Code. This code section likely contains additional details and provisions related to security deposits and exemptions.

Exception for Service Members

A crucial exception to the general rule is outlined concerning service members. If the prospective tenant is a service member, the landlord’s ability to demand a security deposit is limited.

Despite meeting the criteria for the two-month deposit exemption, if the tenant is a service member, the landlord is restricted to requesting a maximum of one month’s rent as a security deposit.

These regulations underscore the legislative intent to protect certain tenants, specifically service members, by imposing limitations on the amount of security deposit landlords can require. The overall framework aims to balance the interests of landlords and tenants while recognizing the unique circumstances of service members who may face challenges related to frequent relocations and deployments.