New California Law Limits Security Deposits to One Month’s Rent

Santa Barbara Housing Advocates and Tenants Celebrate New Rule, While Landlords Are Uneasy About Potential Financial Impact

This Playa Life property on the 6700 block of Del Playa Drive in Isla Vista was at the center of a recent lawsuit over $4,000 wrongfully withheld from six roommates’ security deposit. | Credit: Margaux Lovely

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Security deposits on long-term rentals can no longer exceed the amount of one month’s rent due to a new California law that went into effect on July 1. While tenants are looking forward to greater housing accessibility and affordability, landlords are uneasy about the potential financial impact on themselves.

Previously, landlords could charge deposits of up to two times the rent for an unfurnished unit, and three times the rent for a furnished one. “Having to shovel over two times rent up-front was extremely difficult,” said Zachary Orsinelli, a UCSB graduate and former Isla Vista renter. “But for the once-in-a-lifetime opportunity to live in this beautiful place, we worked hard to figure it out.”

When Orsinelli’s year-long lease with Playa Life — known in court records as Isla Vista Owner LLC — ended, he and his five roommates were shocked to see more than $4,000 withheld from their security deposit. According to the tenants, they left no damages beyond normal wear and tear, which cannot legally be deducted from a security deposit. After a year-and-a-half-long legal battle, Orsinelli and his roommates won back not only their deposit, but also a substantial amount in damages.

Orsinelli speculated that had he and his roommates paid a smaller deposit — like Assembly Bill 12 now requires — “Playa Life might have felt more nervous about trying to take so much of it.”

“Reducing the deposit amount will have an anchoring effect,” said Alex Entrekin, Legal Aid’s managing attorney for housing. “It can lower the amounts in dispute and avoid unnecessary small claims actions.”

While this is a step in the right direction for rental accessibility in California’s tight housing market, landlords are concerned that a lower deposit may not cover the damages incurred.

“Historically we’ve never not had enough deposit to cover damage,” said Erin Murphey Doherty, co-owner of Playa Life/Isla Vista Owner LLC, which manages more than 30 properties in Isla Vista. “But it will remain to be seen going forward.”

However, landlords are still able to file for damages greater than the amount of the deposit — which they have always been able to do. If a tenant refuses to pay, landlords can sue in small claims court.

Sources from Assemblymember Matt Haney’s office — who spearheaded this bill out of San Francisco — say that “mom-and-pop” landlords, with only a property or two under their belt, were the most concerned. They worried that AB-12 would render them more susceptible to “nightmare tenants” who may take advantage of a lower deposit. Therefore, an exception was added for landlords with a maximum of two properties containing no more than four units, who may continue to charge up to twice the monthly rent for a deposit.

Assemblymember Gregg Hart, who represents Santa Barbara, voted for and applauded this bill, adding that it will help “ease the burden” on the high number of renters in the state.

“Anything that can reduce the cost of moving from one home to another is great,” emphasized Entrekin. “But this is also an opportunity to keep looking toward other ways of solving the problem.”