Legal Essentials: Keeping Your Rental Property Compliant in California

There is always something new to talk about when we discuss legal essentials and renting out property in California. We have spent a lot of time talking about rent stabilization, just cause eviction, habitability standards, and fair housing. 

Those are popular topics that keep coming back again and again because there are usually nuances that need to be addressed or changes that must be explained. 

The laws are always changing and the tenant protections are always increasing. Or, so it seems. 

Remaining compliant with all state, local, and federal laws is essential when you’re renting out a home, and you might be surprised at how easy it is to make a legal mistake. There are potential pitfalls everywhere. 

As property managers in Silicon Valley supporting landlords and real estate investors all over this part of California, we prioritize risk management and avoiding liability. This requires us to have a deep understanding of the legal complexities that come into play when we are leasing, managing, and maintaining rental homes. 

Here are some of the new laws that we’re working with, and what you’ll need to do to remain compliant as a California rental property owner. 

Shifting Security Deposit Limits  

Beginning in July of 2024, there are new limits on the amount you can collect from a tenant as a security deposit. 

The new law is AB 12, and it allows you to collect the equivalent of one month’s rent as a security deposit, whether your property is furnished or unfurnished. There is an exception. If you do not rent out more than two properties and a total of four rental units, you can request up to two month’s rent as a security deposit. 

While we’re on the topic of security deposits, let’s not forget the laws around returning that deposit: 

• You have 21 days from the time that your tenant moves out to return their security deposit to them. 
• If you’re withholding any or all of that deposit, make sure you send an itemized list of deductions, explaining why the money was kept. 
  • You can deduct from the deposit to pay for rent that is owed
  • You can deduct for cleaning that needs to be done to return the property to the condition it was in when tenants took possession
  • And, you can deduct for any damage that goes beyond normal wear and tear 

This is one area of the law that leaves property owners vulnerable. You will want to document thoroughly any of that damage that you’re deducting for, otherwise tenants can take you to court. 

Storing Mobility Devices in California Rental Homes

As you may have noticed, e-bikes and scooters are very popular. SB 712 is a recent law that makes it unlawful for you to prohibit a tenant from owning personal micro-mobility devices or from storing and recharging up to one personal micro-mobility device in their home. These personal micro-mobility devices are usually e-bikes, scooters, hoverboards, skateboards, and e-scooters.

What this means for rental property owners is that you cannot ban the storage and recharging of personal micro-mobility devices in the property as long as: 

• The devices are not powered by an electric motor
• The devices comply with certain safety standards for e-bikes and e-scooters. 

If the device does not comply with safety standards, the tenant must have insurance that covers the storage of the device inside the rental home. 

Multi-family Rental Homes and Organic Waste Recycling 

When you’re renting out five or more rental units within a multi-family property, you’ll have to provide the necessary resources for organic waste recycling. This is under SB 1383, a law that’s been in effect for two years now, which mandates the separate disposal of organic waste. 

Make sure your property provides a bin or container that’s labeled for organic waste. Provide the composting information on organic waste collection to any new tenants who move into your property. You’ll have two weeks to give them this information after they move in.

The best way to have this waste removed is by creating an account with your city’s curbside collection service for organics. Otherwise, you will be required to haul the waste to a composting facility. 

Terminating Tenancies and SB 567

SB 567, which goes into effect in April of 2024, tightens up the requirements for a landlord to terminate a tenancy under the Tenant Protection Act (TPA) for no-fault evictions based upon owner move-in or substantial remodeling. There has been some concern that owners are evicting tenants in order to make renovations that aren’t actually happening. 

If this occurs, and an owner is found to violate the TPA by improperly terminating a tenancy or by raising rent beyond the maximum amount, that owner will be liable for actual damages, reasonable attorney’s fees, and costs (at the discretion of the judge) up to three times actual damages for willful violations and punitive damages. 

Make sure you’re not terminating a lease agreement in order to raise the rent more than you’re currently permitted under the statewide rent control laws. 

Screening Standards and Ability to Pay

It’s likely that you pull an applicant’s credit history during your screening process. 

SB 267, which went into effect in January of 2024, requires that landlords offer “ability to pay” standards in lieu of reliance on credit history when a prospective tenant is receiving a government subsidy such as Section 8 vouchers. It is unlawful to use the applicant’s credit history without offering that applicant the option of providing lawful, verifiable alternative evidence of reasonable ability to pay the portion of the rent to be paid by the tenant. This might include, but is not limited to government benefit payments and bank statements. 

When this option is offered, the applicant may elect to provide alternative evidence of reasonable ability to pay, and at that point, you would have to provide the applicant reasonable time to respond with that alternative evidence and reasonably consider that alternative evidence in lieu of the person’s credit history while making a decision on the application.

As we said – always something new to talk about when we’re discussing legal essentials and remaining compliant. 

The best way to ensure you’re protected is to work with a local property management team. We know the laws, and we provide the peace of mind you need to enjoy a profitable and legally compliant investment experience.