California voters firmly rejected Proposition 33 on the November ballot, which could have opened the door to a flurry of local residential rent control measures. Nevertheless, the California Legislature is likely to continue to pile on landlord responsibilities in its attempt to make a positive impact on housing affordability. The legislature’s focus on renters is understandable, considering that nearly 44% of California’s population rent their homes and over 52% of these renters are considered cost burdened. Understanding the latest California rental laws is crucial for property owners to navigate these changes effectively.
In September, California Governor Gavin Newsom signed a slate of new laws aimed at addressing various aspects of the state’s housing crisis. Among them, a trio of bills focused on California residential tenant rights. We summarize key insights from these bills and their impact on landlords.
Overview of New Renter’s Rights Laws
AB 2801: Security Deposit Restrictions for Landlords
Security deposits represent a substantial upfront commitment for many renters, and AB 2801 is putting claims against these security deposits under more scrutiny. Key changes appear in two fronts—what can be deducted from security deposits, and the requirements to support a landlord’s deduction against a security deposit.
The big change first: provided renters leave the unit as clean as when they found it (except for ordinary wear and tear), security deposits are no longer allowed to be used for professional carpet cleaning services or other professional cleaning services. Landlord’s claims for materials and supplies are no longer limited to “an amount necessary to make reasonable replacements,” but now must be limited to “a reasonable amount necessary to restore the premises back to the condition it was in at the inception of the tenancy, exclusive of ordinary wear and tear.”
Additionally, the landlord must provide an itemized list and photo evidence as to why any portion of the deposit was retained. Starting April 1, 2025, landlords must take photographs of the unit after the tenant moves out, but before repairs or cleanings, and photographs again once repairs or cleanings are complete. For all leases beginning on or after July 1, 2025, landlords must take photos before the inception of the tenancy. These changes highlight the importance of landlord compliance with new tenant laws to avoid potential disputes and legal issues.
AB 2747: Reporting Rent Payments to Credit Bureaus
Rent payments can be a sizeable portion of a tenant’s monthly budget. The legislature through AB 2747 wants tenants to be able to reflect their on-time payments in their credit score. This bill requires, on or after April 1, 2025, a landlord of residential real property with more than 15 dwelling units to offer tenants, annually, the option of having their full, on-time rent payments reported to at least one nationwide consumer reporting agency. Landlords are allowed to collect $10 or the actual cost of reporting, whichever is less, from the tenant.
This bill largely builds on SB 1157, which requires landlords who receive local, state, or federal housing subsidies to offer tenants in subsidized units the option of having their rental payments reported to credit bureaus. Landlords must provide the option in writing and will need to manage their rent reporting systems. A tenant may elect to have the on-time rent payments reported at any time after the landlord makes the offer, but once elected, if a tenant later opts out or fails to pay the reporting costs there is a 6-month cooling off period before being eligible for reenrollment. If the tenant elects the reporting and fails to pay the reporting fee, the landlord may not terminate the tenancy for lack of payment, deduct the unpaid fee from the security deposit, or apply a portion of the rent toward the payment of the fee.
Understanding the specific requirements for the offer to report and managing the reporting system will be essential for effective compliance.
SB 611: Limiting Fees and Charges
In the age of inflation, “add-on” or “junk” fees have become a target issue. SB 611 aims to restrict the costs that landlords can pass on to renters (absent inclusion in the base rent) by limiting certain tenant fees. Landlords are already required to provide tenants with an option for payment beyond cash or electronic funds transfer, and SB 611 now prohibits landlords from charging tenants a fee for paying for rent or a security deposit by check. Landlords are also prohibited from charging a fee in connection with certain notices to quit and notices regarding the landlord’s intent to terminate a month-to-month tenancy.
Additionally, a landlord that charges a higher security deposit for a service-member tenant based on that service member’s history of poor credit or damage to a unit must clearly disclose the amount and reasoning in the lease agreement and refund the additional amount within six months so long as the service-member tenant is not in arrears for any rent due. These provisions require landlords to adjust their fee structures and increase disclosures in their leasing agreements.
Impact on Landlords
These recent legislative changes significantly impact operation and compliance requirements for landlords. Ensuring compliance with these new laws is crucial to avoid potential disputes and legal issues.
Best Practices for Landlords
Managing security deposits:
- Be ready to photo-document units before a tenant moves in, after they move out, and before and after any necessary repairs.
- Itemize all reasonably necessary repairs with supporting documentation and be mindful that conditions not documented during an initial inspection may not be claimed against the security deposit later.
- Thoroughly document any reasonably necessary repairs to restore the unit back to the condition it was in before the lease.
Implementing rent reporting systems:
- Proactively seek property management software that facilitates on-time payment reporting and a system to notify tenants yearly of the option to have on-time payments reported.
Avoiding prohibited fees:
- Remain aware of prohibited fee categories, such as those for rent or security deposits paid by checks.
- Prior to charging a fee for a notice, ensure it is not included in prohibited categories such as notices regarding unlawful detainer, intent to terminate, or abandonment of property.
- Identify service member tenants and update standard lease forms to include a statement of any higher security deposit charges, along with the reasons.
