New California Owner Laws regarding Tenants

Effective Law Commencement Date: April 1st, 2025 (4/1/2025) for all new leases and notification to all residents prior to April 1st.

This is a compliance newsletter for all our multifamily owners, this way they can stay in compliance with current laws. The CA Assembly enacted two separate tenant laws effective immediately as of (4/1/2025).

A basic summary of each of the laws is bullet pointed below along with pros and cons for each. In addition, we’ve provided links to the actual legislative bills plus other helpful resources through the CA Apartment Association.

AB 2747, The Tenant Credit Reporting Law

AB 2747, enacted in California, requires landlords of residential properties with 15 or more units to offer tenants the option of having their on-time rent payments reported to credit bureaus. This allows tenants to build their credit score by demonstrating responsible rent payment history. Landlords can charge a fee for this service, not exceeding $10 per month. The bill also outlines the process for tenants to opt into and out of rent reporting and includes provisions for landlords to comply with their obligations.

Which Owners are required? Owners of properties of 15 or more units or any residential property owned in a corporate entity where the owner owns more than 1 residential property.

Mandatory Offering and Obligations:

Provide ALL new leases with the rental reporting option.
Notify ALL leases prior to April 1, 2025, in writing via email, letter, or addendum of their Option to opt-in on the rental payment reporting.
Report all positive on-time payments to the credit bureaus.
If the Tenant opts-in, the owner is responsible for reporting all on-time rental payments to the bureaus until the following year.
Annually, the owner must send the reporting option to the tenant for them to either opt-in or out.
Only on-time and full rent payment can be reported, no negative inquiries.

Reporting & Fees:

It’s recommended that owners get set up with a rental software company or similar which will report the payments to the credit bureaus.
The owners charge the tenants cannot exceed $10 per month or the actual cost of the report. In summary, the lesser of the two charges.

Tenant Rights & Options:

Tenants must reply in writing that they’re opting into the rental reporting.
Tenants can opt-out of the reporting, then opt-in after 6 months.

The Pros of AB 2747:

Incentivizes timely rent payments.
Less turnover because tenants are satisfied that their rent payments are going towards their credit rating and improving their borrowing capacity.
Owner’s will have to remain organized and in compliance which means they’ll monitor their rent collections more closely.

The Cons:

It’s another legal documentation item that the landlord or property manager must comply with all the other laws.
The owner will bear the cost of any reporting above the $10 threshold.
Only positive payments are reported, there’s no consequence for any non or negative payments.
Time-consuming for the owner or manager plus tenants must be notified on an annual basis.

*AB 2801, Security Deposits in Rental Properties:

AB 2801 is a California law that modifies security deposit regulations, particularly affecting landlords and tenants in residential rental properties. It mandates that landlords provide photographic documentation of a unit’s condition before and after a tenant moves in and out, and after any necessary repairs or cleaning, according to Multifamily Dive. The law aims to increase transparency and fairness in security deposit deductions.

Mandatory Photo Documentation: Owners must take pre-move-in photos along with move-out photos prior to any repairs, and again after the repairs were completed to make the unit rent ready.

Itemized Statements:

Detailed statements, receipts, documentations, and photos for any deposit deductions.

Only Necessary Deductions

The law only allows for the security deposit to be deducted for repairs bringing the unit back to its original condition when tenancy began, excluding normal wear / tear and cleaning.

Timing & Consequences

The owner or property manager has 21 days to provide the itemized deduction statement along with supporting documentation, photos, and receipts. If not done within the 21 days, the owner forfeits the right for making claims against the security deposit.

The Pros

Forces owners to be organized from the beginning. Move-In & Out inspections should be already a part of the leasing process.
Owners will have more documentation.
Transparency between owners and tenants.
Units will become rent ready sooner.

The Cons

Short 21-day window to coordinate repairs and improvements.
Potentially objective since there could be disagreement in photos and invoices.

*Links to the Legislative Assembly Bill