AB 12 (effective July 2024) caps California residential security deposits at one month's rent maximum for most landlords. Small-landlord exception allows up to two months.
Before AB 12, California allowed deposits of up to two months rent for unfurnished units (three months for furnished). AB 12 reduced this to one month rent maximum.
Small-landlord exception: landlords owning two or fewer properties with four or fewer total units, held as natural person/LLC/family trust, can collect up to two months rent. Most larger owners are subject to the one-month cap.
Effect on LA multifamily economics is modest but real. On a building with $2,000 average rent, the deposit cap reduces pre-lease cash by roughly $2,000 per unit — meaningful for larger buildings. Factor into pro forma reserves for post-acquisition underwriting.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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