California Property Management Laws: AB 1482, Trust Accounts

California property management laws start with a licensing rule and extend into rent control, deposits, habitability, fair housing, and eviction procedure. Anyone who manages rental property for compensation in California must hold a real estate broker license, and from that point forward the job means running a compliance operation as much as a business one. The Tenant Protection Act caps most annual rent increases and requires just cause to end a tenancy after 12 months. Security deposits are now capped at one month’s rent for most landlords. Trust funds must stay separate from operating money. Miss any of it, and the consequences run from Department of Real Estate discipline to tenant lawsuits.

Who Can Legally Manage Rental Property

Performing property management for compensation in California without a real estate broker license is illegal. The Business and Professions Code treats renting units, collecting rent, and negotiating lease terms as real estate activities that require licensure.¹ There is no separate property management license in California. A licensed real estate salesperson can do the work, but only under the direct supervision of a broker.

A few exceptions exist. Owners managing their own units do not need a license. Resident managers of apartment buildings and complexes are exempt, as are their employees.² Employees of a licensed broker can handle basic administrative work like showing available units, but they cannot negotiate lease terms or collect rent independently. Doing licensed activities without credentials draws fines and disciplinary action from the Department of Real Estate.

Rent Increase Caps and Just Cause Eviction

The Tenant Protection Act, often called AB 1482, sets the two rules that shape most day-to-day decisions: a ceiling on annual rent increases and a just-cause requirement for ending a tenancy.

How Much You Can Raise Rent

For covered units, annual rent increases cannot exceed the lower of 5% plus the local Consumer Price Index change, or 10% total.³ Because CPI varies by region, the exact cap depends on where the property sits. The cap applies whether the tenant is month-to-month or on a longer lease.

When You Can End a Tenancy

Once a tenant has continuously occupied a unit for 12 months, the landlord cannot end the tenancy without stating a legally recognized reason in the written termination notice.⁴ At-fault grounds cover nonpayment, lease breach, criminal activity, and similar tenant conduct. No-fault grounds cover things like the owner moving in, substantial remodeling that requires vacancy, or withdrawing the unit from the market. On no-fault termination, the tenant is generally entitled to relocation assistance equal to one month’s rent or a waiver of the final month’s rent.

What AB 1482 Does Not Cover

Several categories of property fall outside the Act:

Buildings constructed within the last 15 years on a rolling basis. A unit built in 2011 became covered in 2026.
Owner-occupied duplexes where the owner has lived in one unit for the entire tenancy.
Single-family homes and condos, but only if the property is not owned by a corporation, real estate trust, or LLC with a corporate member, and the landlord has given the tenant the required written notice that the unit is exempt.
Deed-restricted affordable housing for low- or moderate-income households.

When a portfolio mixes covered and exempt units, track the status of each property individually. A no-cause termination on a covered unit becomes a wrongful eviction claim.

Security Deposit Limits and Return Deadlines

Since July 1, 2024, the maximum security deposit for most California rental units is one month’s rent, whether the unit is furnished or unfurnished.⁵ A small-landlord exception lets owners of no more than two residential properties totaling no more than four units collect up to two months’ rent, but only if the owner is a natural person or an LLC whose members are all natural persons. The exception does not apply when the tenant is a military service member.⁶

Within 21 calendar days after move-out, the landlord must return the full deposit or send an itemized statement of every deduction with the remaining balance. Allowable deductions are limited to unpaid rent, cleaning the unit back to its move-in condition, and repairing damage beyond normal wear and tear.⁵ When total deductions hit $125 or more, the statement must include detailed explanations, with copies of bills for outside work or, if the landlord did the work, a description of what was done, hours, and hourly rate. Missing the deadline or the documentation opens the door to a small-claims lawsuit where the tenant can seek up to twice the deposit amount as a penalty.

Trust Account Rules for Client Funds

A licensed broker who collects money for property owners or tenants must keep those funds completely separate from personal or business operating accounts. Client funds go into a designated trust account at a bank, into a neutral escrow depository, or directly to the property owner within three business days of receipt.⁷ The rule covers security deposits, collected rents, and any other money received while managing the property.

Commingling is a serious violation. Mixing tenant rent or deposit funds with the broker’s own money can lead to license suspension or revocation. The account must be in the broker’s name (or the broker’s licensed fictitious business name) as trustee, and it generally cannot be an interest-bearing account that allows the bank to require advance notice before withdrawals. The Department of Real Estate audits these accounts and treats discrepancies as grounds for discipline.

Habitability Standards You Cannot Waive

Every residential landlord is bound by the implied warranty of habitability. The unit must be safe and fit to live in for the entire tenancy, and no lease provision can waive the obligation.⁸ The baseline conditions include:

Weatherproofing: roof and exterior walls that keep out rain and wind, with unbroken windows and doors.
Plumbing: working plumbing connected to a sewage disposal system, with hot and cold running water.
Heating: functional heating facilities maintained in good working order.
Electrical: safe wiring, lighting, and electrical equipment in good working order.

These minimum standards come from Civil Code Section 1941.1.⁹ A tenant who shows the landlord failed to maintain any of these conditions has a defense against eviction and can support claims for rent reduction or damages. Deferring maintenance on basic systems puts the owner in real legal jeopardy.

When and How You Can Enter a Rented Unit

Tenants have a right to quiet enjoyment, and California law tightly limits when a landlord or manager may enter. Entry is permitted only for specific reasons: emergencies like a burst pipe, necessary repairs, showing the unit to prospective tenants or buyers, or certain health and safety inspections.¹⁰

Outside emergencies, written notice must go out at least 24 hours in advance, and entry can happen only during normal business hours unless the tenant consents to a different time. The notice must state the date, approximate time, and purpose of entry. It can be hand-delivered, left with a person of suitable age at the unit, or posted on or near the main entry door. Abusing the right of access or using it to harass a tenant violates the statute, and repeat violations can support a damages claim.

Disclosures Required Before Leasing

Several disclosures must reach the tenant before a lease or rental agreement is signed. Missing any of them can void certain lease provisions or expose the owner to liability.

Lead-based paint. For any property built before 1978, federal law requires disclosure of known lead-based paint hazards and delivery of the EPA pamphlet.¹¹
Sex offender database. Every rental agreement must include a specific notice pointing tenants to the California Department of Justice’s Megan’s Law site.¹²
Bed bugs. Before a new tenancy begins, the landlord must provide written information on bed bug identification, prevention, and the importance of prompt reporting. A unit with a known infestation cannot be shown, rented, or leased until the infestation is eliminated.¹²
Shared utility meters. If a tenant’s gas or electric meter also serves common areas or other units, the arrangement must be disclosed before signing.

Managers running multiple properties should build a disclosure checklist into their leasing workflow. A single missed disclosure often surfaces in litigation and turns a routine dispute into a costly one.

Fair Housing Compliance

California’s fair housing protections go well beyond the federal baseline. The federal Fair Housing Act prohibits discrimination based on race, color, national origin, religion, sex, familial status, and disability.¹³ California’s Fair Employment and Housing Act adds sexual orientation, gender identity, gender expression, marital status, ancestry, source of income, veteran or military status, and genetic information.¹⁴

The source-of-income protection matters most for property managers. You cannot reject an applicant because they plan to pay rent with a Housing Choice Voucher (Section 8) or other government assistance. Ads that say “no Section 8” violate California law.

Assistance Animals

Landlords must grant reasonable accommodations for tenants with disabilities, including exceptions to no-pet policies for service animals and emotional support animals. No pet deposits or fees are allowed for assistance animals.¹⁵ When the disability and need for the animal are not obvious, the landlord may ask for documentation from a healthcare professional confirming the disability and the therapeutic need. Certificates bought from online registries that sell them to anyone are generally not considered reliable documentation.

Screening Tenants Under Federal Credit Rules

Background and credit checks trigger obligations under the Fair Credit Reporting Act. Before pulling a consumer report, get the applicant’s written permission and certify to the reporting agency that the report will be used only for housing purposes.¹⁶

If you deny an application, require a co-signer, charge higher rent, or take any other adverse action based on the report, you must notify the applicant. That notice must include the reporting agency’s name, address, and phone number, a statement that the agency did not make the decision, and an explanation of the applicant’s right to dispute inaccurate information and request a free copy of the report within 60 days. When a credit score factors into the decision, the notice must also include the score, how the model works, and the key factors that hurt the score.¹⁶

Once the decision is made, reports must be securely destroyed. Shred paper copies, and make sure electronic files cannot be read or reconstructed. Tossing a credit report in the office trash is a violation.

Eviction Notice Types and Procedure

California’s eviction process begins with a written notice, and using the wrong notice type or format can sink the case in court. The notice depends on the reason:

Three-day notice to pay rent or quit, used when the tenant is behind on rent. It must state the exact amount owed, where and how to pay, and that the tenant has three days to pay or move out. Weekends and court holidays do not count.¹⁷
Thirty-day notice to quit, ending a month-to-month tenancy when the tenant has rented for less than one year.
Sixty-day notice to quit, required when the tenant has rented for one year or more.

For properties covered by the Tenant Protection Act, a 30-day or 60-day notice must also state the just-cause reason. If the reason is a no-fault ground, the notice must inform the tenant of the right to relocation assistance or a rent waiver for the last month.¹⁷ Only after the notice period expires without compliance or move-out can the landlord file an unlawful detainer action. Self-help evictions, like changing locks or shutting off utilities, are illegal in California and can leave the landlord owing the tenant significant damages.

Military Tenants

The federal Servicemembers Civil Relief Act lets active-duty military tenants terminate a lease early without penalty when they receive orders for a permanent change of station or a deployment of 90 days or more. The tenant must provide written notice with a copy of the orders. The lease ends 30 days after the next rent due date following delivery of the notice, no early termination fees apply, and prepaid rent covering the period after termination must be refunded within 30 days.

Resident Manager Rule for Larger Buildings

California requires an on-site resident manager at any apartment building with 16 or more units, unless the owner lives on the premises.¹⁸ The rule also covers hotels with 12 or more guest rooms. The resident manager must be a responsible person in charge of the property, meaning someone able to respond to emergencies, handle routine maintenance, and enforce building rules.

Companies taking on a building near the 16-unit threshold sometimes miss this. If the property qualifies, the management company has to make sure someone lives on-site, which often means providing a unit at reduced or no rent. That arrangement carries employment law consequences, since resident managers are generally classified as employees and entitled to minimum wage protections for on-call hours.

Renovation Rules for Pre-1978 Buildings

Beyond the leasing disclosure, renovations on pre-1978 buildings fall under the EPA’s Renovation, Repair, and Painting rule. Any firm performing renovations for compensation in pre-1978 housing must be EPA-certified, and a certified renovator must be assigned to every job.¹¹

The certified renovator must be physically present when warning signs go up, containment is set, and post-renovation cleaning happens. Work practices include covering floors with plastic sheeting, sealing off the work area to prevent dust spread, and using HEPA-equipped vacuums for cleanup. Open-flame torching of painted surfaces is prohibited, and heat guns can only be used below 1,100 degrees Fahrenheit. Before work begins, the firm must give occupants the EPA’s “Renovate Right” pamphlet and get written acknowledgment. Firm certification runs five years and must be renewed. Property managers who hire uncertified contractors for renovation work in older buildings share liability for the violation.

Written Management Agreements

A licensed broker acting as a property manager must have a formal written agreement with every property owner. The contract establishes the agency relationship and defines the manager’s authority.¹⁹ The Department of Real Estate treats the absence of a written agreement as a compliance failure, and a vague handshake arrangement invites disputes over who authorized what.

At minimum, the agreement should cover:

Scope of authority, including whether the manager can sign leases, approve maintenance expenditures, initiate evictions, and handle the owner’s funds.
Compensation, typically a percentage of collected rent plus any separate fees for leasing, renewals, or oversight of major repairs.
Trust account handling, including how tenant funds will be held and disbursed.
Termination, including required notice periods.
Insurance, including whether the manager carries errors and omissions coverage for claims like wrongful eviction, discrimination, or failure to maintain the property.

Read the scope-of-authority section carefully. A manager with broad authority to approve repairs and no spending cap can generate expenses the owner never anticipated. An agreement requiring owner approval for every minor repair slows response times and can lead to habitability complaints from tenants who wait too long for a fix.

Late Fees

California does not set a specific dollar cap on late fees. Civil Code Section 1671 requires that any late fee be a reasonable estimate of the actual cost the landlord incurs from a late payment. Courts have found fees in the range of 5% to 10% of monthly rent defensible when they genuinely reflect administrative costs, but a fee that functions as a penalty rather than a cost estimate is unenforceable. Document the basis for whatever late fee ends up in the lease. A tenant challenging the fee in court shifts the burden to the landlord to prove it was reasonable.

1
California Legislative Information. Business and Professions Code – BPC Article 1 Scope of Regulation
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California Legislative Information. California Code BPC 10131.01
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California Legislative Information. California Civil Code 1947.12
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California Legislative Information. California Civil Code 1946.2
5
California Department of Justice. Know Your Rights Security Deposits
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California Apartment Association. New Law Limiting Security Deposits in Effect as of July 1
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New York Codes, Rules and Regulations. California Code of Regulations Title 10 2832 Trust Fund Handling
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California Department of Justice. Know Your Rights Habitability
9
Justia. CACI No. 4320 Affirmative Defense Implied Warranty of Habitability
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California Legislative Information. California Civil Code 1954
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eCFR. 40 CFR Part 745 Subpart E Residential Property Renovation
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California Department of Real Estate. Landlords Disclosures
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U.S. Department of Housing and Urban Development (HUD). Housing Discrimination Under the Fair Housing Act
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California Legislative Information. California Government Code 12955
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U.S. Department of Housing and Urban Development (HUD). Fact Sheet on HUDs Assistance Animals Notice
16
Federal Trade Commission. Using Consumer Reports What Landlords Need to Know
17
California Courts. Types of Eviction Notices Tenants
18
Cornell Law Institute. California Code of Regulations Title 25 Section 42 Caretaker
19
California Department of Real Estate. Reference Book Chapter 22 Property Management