Property Management Laws And Regulations In California

California regulates third-party property management through several authorities at once, and the rules that matter most to a management company are the ones covering your license, your client trust accounts, and the money you hold on behalf of owners and tenants. This guide covers those rules for professional managers, with the statute or agency regulation behind each one.

Everything below is sourced to California's own statutes, agency rules, and court materials rather than to secondhand summaries. Specific dollar amounts and deadlines do change; the citations do not, so you can always open the authority and confirm the current text before you act on it.

Licensing Requirements For Property Managers

Third-party residential property management in California is licensed real estate activity. Anyone who, for compensation, leases or rents property for others, solicits tenants, or collects rents needs a real estate broker license from the California Department of Real Estate (DRE), or must work as a licensed salesperson under a broker. Narrow exemptions cover resident apartment managers and certain unlicensed on-site staff working under a broker's supervision. Broker licenses renew every four years with 45 hours of continuing education.

• A person who, for compensation, leases or rents or offers to lease or rent, places for rent, solicits listings of places for rent, solicits prospective tenants, or collects rents from real property for others is acting as a real estate broker and must be licensed. (Cal. Bus. & Prof. Code § 10131(b))
• The licensing agency is the California Department of Real Estate (DRE), which issues broker and salesperson licenses for four-year periods. (Cal. Bus. & Prof. Code § 10131; DRE license renewal requirements)
• Resident managers of apartment buildings or complexes, and their employees, are exempt from real estate licensing, as are managers of hotels, motels, and auto and trailer parks. (Cal. Bus. & Prof. Code § 10131.01)
• Unlicensed employees of a property management firm may, under a licensed broker's reasonable supervision and control, show units and common areas, provide rental applications and lease information, accept deposits and fees, and accept signed lease agreements. (Cal. Bus. & Prof. Code § 10131.01)
• Broker renewal requires 45 clock hours of DRE-approved continuing education every four years, including mandatory subjects such as ethics, agency, trust fund handling, risk management, management and supervision, fair housing (with an interactive participatory component), implicit bias, and at least 18 hours of consumer protection courses. (DRE Continuing Education Requirements)
• Brokers must retain copies of listings, deposit receipts, canceled checks, trust records, and other transaction documents for three years, and the DRE may examine and audit those records, without advance notice where there is sufficient cause. (Cal. Bus. & Prof. Code § 10148)

Client Trust Account Rules

Client funds received by a property management broker must go into a neutral escrow, to the principal, or into a trust account at a California bank in the broker's name as trustee, within three business days of receipt. Commingling is prohibited and is grounds for license discipline, with only narrow exceptions such as up to $200 of broker funds to cover bank charges. Brokers must keep a separate record for each beneficiary or property, reconcile records monthly, and are subject to DRE audits; trust account shortages are a leading cause of license revocation.

• A broker who accepts funds belonging to others must deposit them into a trust account maintained with a bank or recognized depository in California in the broker's name as trustee, unless the funds are placed into a neutral escrow depository or into the hands of the broker's principal. (Cal. Bus. & Prof. Code § 10145)
• Trust funds must be placed into the hands of the owner, a neutral escrow depository, or the trust account not later than three business days following receipt of the funds by the broker or the broker's salesperson. (10 Cal. Code Regs. § 2832 (Commissioner's Regulation 2832))
• Commingling broker funds with trust funds is prohibited and is grounds for license suspension or revocation; Regulation 2835 permits only limited exceptions, including up to $200 of broker funds in the trust account to cover bank service charges. (Cal. Bus. & Prof. Code § 10176(e); 10 Cal. Code Regs. § 2835)
• Commissions and fees earned by the broker that are collectible from the trust account may remain in the account no more than 25 days after they are earned; leaving them longer is commingling. (10 Cal. Code Regs. § 2835)
• Brokers must keep a record of all trust funds received and disbursed, plus a separate record for each beneficiary or transaction; for rental properties the Separate Record for Each Property Managed (DRE form RE 4525) may be used, and the cash record must be reconciled monthly with the bank statement and the separate beneficiary records. (10 Cal. Code Regs. §§ 2831, 2831.1, 2831.2)
• Trust account withdrawals may be made only by the broker, a designated broker-officer, a salesperson specifically authorized in writing, or an unlicensed employee covered by a fidelity bond at least equal to the maximum trust funds the employee can access at any time. (10 Cal. Code Regs. § 2834; Cal. Bus. & Prof. Code § 10145)
• A trust account normally may not be interest-bearing; interest-bearing accounts are allowed only at the request of the funds' owner, with federal insurance, separation from broker funds, full disclosure, and no interest benefit to the broker. (Cal. Bus. & Prof. Code § 10145(d))

Trust account rules are where California management companies get into trouble fastest, because a shortage is a licensing problem and not just a bookkeeping problem. The California DRE audits the reconciliation itself and not just the balance, so trust accounting for property managers is treated as a compliance function rather than clerical work. The habits that keep you clean are the boring ones: deposit on time, never let operating money and client money mix, reconcile every account every month, and keep a per, property record you could hand to an auditor without preparing it first. Our guide to preparing for a trust account audit walks through what examiners actually ask for.

Security Deposit Rules

Since July 1, 2024 (AB 12), California caps security deposits at one month's rent for most landlords, with a two-month exception for small natural-person landlords that never applies to service members. Deposits must be accounted for within 21 calendar days after move-out with an itemized statement, receipts for deductions over $125 in combined repair and cleaning charges, and, under AB 2801, photographs documenting the unit's condition. Bad faith retention exposes the landlord to statutory damages of up to twice the deposit.

• The maximum security deposit is one month's rent, in addition to first month's rent, whether the unit is furnished or unfurnished. (Cal. Civ. Code § 1950.5(c)(1))
• A landlord who is a natural person (or LLC of natural persons) owning no more than two residential rental properties with no more than four total units may collect up to two months' rent, but this exception does not apply when the applicant is a service member. (Cal. Civ. Code § 1950.5(c)(5))
• The itemized statement and any refund are due no later than 21 calendar days after the tenant vacates. (Cal. Civ. Code § 1950.5(h))
• Copies of invoices, receipts, and vendor information must accompany the itemized statement unless total deductions for repairs and cleaning are $125 or less, or the tenant waived the documentation right. (Cal. Civ. Code § 1950.5(h)(2), (h)(4))
• Landlords must photograph the unit within a reasonable time after possession is returned and again after repairs or cleaning are completed (requirements applying from April 1, 2025), and for tenancies beginning on or after July 1, 2025 must also photograph the unit immediately before or at the inception of the tenancy. (Cal. Civ. Code § 1950.5(g) (AB 2801))
• Tenants may request an initial move-out inspection during the last two weeks of the tenancy, with 48 hours' prior written notice of the inspection, so they can cure deficiencies before deductions are taken. (Cal. Civ. Code § 1950.5(f))
• Bad faith claim or retention of a deposit subjects the landlord to statutory damages of up to twice the amount of the security, in addition to actual damages; the statute does not require deposits to be held in a separate account or to earn interest statewide. (Cal. Civ. Code § 1950.5(m))

Lease Agreements And Required Disclosures

California layers extensive disclosure duties onto residential leases. Managers must identify who manages the property and who accepts rent, deliver a copy of the lease within 15 days, include the Tenant Protection Act notice where the law applies, and provide bed bug and other statutory notices. Application screening fees are capped and receipt-and-refund rules apply, with new amendments effective January 1, 2026.

• The lease or a written statement must disclose the name, phone number, and street address of the authorized property manager and of the owner or agent authorized to receive service of process and rent, and the landlord must give the tenant a copy of the executed rental agreement within 15 days; information must be kept current. (Cal. Civ. Code § 1962)
• Tenancies covered by the Tenant Protection Act must include a statutory notice in at least 12-point type informing tenants that California law limits rent increases and requires just cause for termination, citing Civil Code sections 1946.2 and 1947.12. (Cal. Civ. Code § 1946.2)
• Landlords must give tenants a written bed bug notice in at least 10-point type covering identification, behavior, prevention, and the procedure for reporting suspected infestations. (Cal. Civ. Code § 1954.603)
• Application screening fees are capped at $30 adjusted annually by CPI since 1998, an itemized receipt is required, and the fee must be refunded within specified windows (for example, within 7 days if the application is never considered); the statute was amended by AB 1170 effective January 1, 2026. (Cal. Civ. Code § 1950.6)
• If required disclosures are not made, a successor owner or manager may not serve a notice to quit or bring an eviction for rent that came due during the period of noncompliance, and the person who signed the lease becomes the owner's agent for service of process. (Cal. Civ. Code § 1962(c)-(d))

Entry Notice And Tenant Privacy

Civil Code 1954 limits landlord entry to enumerated purposes and requires reasonable written notice, with 24 hours presumed reasonable and entry restricted to normal business hours absent consent or emergency. Special rules apply to sale showings and the pre-move-out inspection.

• A landlord may enter a dwelling only for enumerated reasons: emergency, agreed repairs or services, showing the unit to prospective tenants, buyers, or contractors, court order, abandonment or surrender, or specified inspections. (Cal. Civ. Code § 1954(a))
• Reasonable written notice of intent to enter is required, and 24 hours is presumed reasonable; if the notice is mailed, mailing at least six days before entry is presumed reasonable. (Cal. Civ. Code § 1954(d)(1))
• Entry must occur during normal business hours unless the tenant consents otherwise or an emergency exists. (Cal. Civ. Code § 1954(b)-(c))
• When the property is for sale, oral notice (including by phone) is permitted for showings if the tenant received written notice within the prior 120 days that the property is for sale; 24 hours remains the presumed reasonable notice. (Cal. Civ. Code § 1954(d)(2))
• The initial move-out inspection requires 48 hours' prior written notice unless the parties waive it in writing. (Cal. Civ. Code § 1950.5(f)(1))

Rent, Late Fees, And Other Charges

The Tenant Protection Act (AB 1482) caps annual rent increases at 5 percent plus regional CPI, never more than 10 percent, for covered housing statewide through January 1, 2030, and defers to stricter local rent stabilization ordinances. Late fees face California's strict liquidated damages standard for consumer contracts, screening fees are capped, and rent reporting service fees are limited to $10 per month.

• For covered housing, gross rent may not increase more than 5 percent plus the regional CPI change, or 10 percent, whichever is lower, over any 12-month period, measured against the lowest rent charged in the prior 12 months, with at most two increases in that period. (Cal. Civ. Code § 1947.12(a))
• Housing issued a certificate of occupancy within the previous 15 years, deed-restricted affordable housing, and certain other categories are exempt from the state rent cap; units already covered by a stricter local rent control ordinance follow the local ordinance. (Cal. Civ. Code § 1947.12(d))
• The statewide rent cap statute remains in effect until January 1, 2030, when it is repealed by its own terms; willful violations can bring treble damages plus attorney fees. (Cal. Civ. Code § 1947.12)
• Late fees in residential leases are liquidated damages: under Civil Code 1671(d) such provisions in dwelling leases are void unless fixing actual damages would be impracticable or extremely difficult, in which case a reasonable pre-agreed amount is presumed valid. (Cal. Civ. Code § 1671(d))
• Covered landlords offering positive rent reporting may charge no more than the lesser of their actual cost or $10 per month, and nonpayment of that fee cannot be grounds for eviction or a deposit deduction. (Cal. Civ. Code § 1954.07)
• Application screening fees are capped at $30 plus CPI adjustment, with mandatory receipts and refund rules. (Cal. Civ. Code § 1950.6)

Fee income is also taxable income, and how you record management fees, late fees, and pass, through charges affects both your compliance position and your books. See our guide to California property management taxes for the reporting side.

Fair Housing Obligations

The California Civil Rights Department (CRD) enforces the Fair Employment and Housing Act, which protects far more classes than federal law, including source of income (Section 8 and other vouchers), sexual orientation, gender identity and expression, marital status, ancestry, citizenship and immigration status, veteran or military status, genetic information, and age. Complaints must be filed with CRD within one year.

• FEHA prohibits housing discrimination based on race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, veteran or military status, and genetic information. (Cal. Gov. Code § 12955)
• Source of income is defined to include lawful, verifiable income paid directly to the tenant or to the landlord on the tenant's behalf, expressly including federal Section 8 housing assistance vouchers and HUD-VASH vouchers, so refusing voucher holders is unlawful. (Cal. Gov. Code § 12955(p))
• The Civil Rights Department (CRD) investigates and enforces housing discrimination complaints; a complaint must be filed within one year of the alleged discriminatory act, or the person may sue in court within two years without filing with CRD first. (Cal. Gov. Code § 12955 et seq.; CRD housing enforcement)
• Landlords and agents may not make written or oral inquiries about protected characteristics or publish any notice or advertisement indicating a preference, limitation, or discrimination based on a protected class. (Cal. Gov. Code § 12955(b)-(c))
• Financial and income standards must account for the aggregate income of all persons residing together, and landlords may not use income standards that discriminate against rent subsidy recipients. (Cal. Gov. Code § 12955(n)-(o))

Habitability And Safety Duties

Civil Code 1941.1 lists the baseline characteristics a rental must have to be tenantable, from weatherproofing and plumbing to freedom from vermin, and beginning with leases signed on or after January 1, 2026 the list adds a working stove and refrigerator. Retaliation against tenants who exercise habitability rights is prohibited for 180 days and carries punitive damages.

• A dwelling is untenantable if it substantially lacks items including effective weatherproofing, plumbing and gas in good working order, hot and cold running water, code-compliant heating and electrical systems, clean grounds free of vermin, adequate garbage receptacles, and floors, stairways, and railings in good repair. (Cal. Civ. Code § 1941.1(a))
• For leases executed on or after January 1, 2026, habitability also requires a working stove capable of safely cooking food and a functional refrigerator, with limited tenant opt-out provisions (AB 628). (Cal. Civ. Code § 1941.1 (as amended by AB 628, Stats. 2025))
• A landlord may not evict, raise rent, or decrease services within 180 days after a tenant exercises habitability rights, such as complaining to the landlord or a government agency about conditions, if the tenant is not in default on rent. (Cal. Civ. Code § 1942.5(a))
• Retaliation involving fraud, oppression, or malice exposes the landlord to actual damages plus punitive damages of $100 to $2,000 for each retaliatory act, and the prevailing party may recover attorney fees if requested at case initiation. (Cal. Civ. Code § 1942.5(h)-(i))

Eviction Basics

California evictions proceed as unlawful detainer actions in superior court, preceded by statutory notices such as the 3-day notice to pay rent or quit, counted excluding weekends and judicial holidays. Tenancies covered by the Tenant Protection Act also require just cause, and no-fault terminations trigger relocation assistance. The court process typically runs 30 to 45 days or more from service of the lawsuit.

• The eviction lawsuit is called an unlawful detainer; grounds include holding over after lease expiration, nonpayment of rent, breach of covenant, and nuisance, waste, or illegal use. (Cal. Code Civ. Proc. § 1161)
• The 3-day notice to pay rent or quit and the 3-day notice to perform covenant or quit exclude Saturdays, Sundays, and judicial holidays from the count; the rent notice must state the amount due and how and to whom to pay. (Cal. Code Civ. Proc. § 1161(2)-(3))
• After 12 months of continuous occupancy, covered tenancies may only be terminated for statutory at-fault or no-fault just cause, and no-fault terminations require relocation assistance equal to one month's rent or a final-month rent waiver. (Cal. Civ. Code § 1946.2)
• Per the California courts' self-help center, the unlawful detainer process typically takes 30 to 45 days or more from service of court papers to move-out, after the notice period has run. (California Courts Self-Help Guide, Evictions)

Recent Changes Worth Tracking

These are the California changes most likely to affect a management company's procedures. Confirm the effective date against the source below before you update a lease template or a policy.

• Effective 2024-07-01: AB 12 capped security deposits at one month's rent for most landlords, with a limited two-month exception for small natural-person landlords that does not apply to service members. (Cal. Civ. Code § 1950.5(c))
• Effective 2025-04-01: AB 2801 requires photographs documenting unit condition: move-out and post-repair photos delivered with the itemized deposit statement for requirements applying from April 1, 2025, and move-in photos for tenancies beginning on or after July 1, 2025. (Cal. Civ. Code § 1950.5(g))
• Effective 2025-04-01: AB 2747 requires covered landlords (generally portfolios over 15 units, or corporate owners) to offer tenants positive rent payment reporting to a credit bureau at lease signing and annually, starting April 1, 2025, with the fee capped at the lesser of actual cost or $10 per month. (Cal. Civ. Code § 1954.07 (Stats. 2024, Ch. 279))
• Effective 2026-01-01: AB 628 adds a working stove and refrigerator to the habitability standards for leases executed on or after January 1, 2026, with a 30-day repair-or-replace duty for recalled appliances and a tenant option to supply their own refrigerator by agreement. (Cal. Civ. Code § 1941.1 (Stats. 2025))
• Effective 2026-01-01: AB 1170 amends the application screening fee statute (receipt, refund, and process requirements under Civil Code 1950.6), effective January 1, 2026. (Cal. Civ. Code § 1950.6 (Stats. 2025, Ch. 67))

Staying Compliant Without Guessing

Most California compliance failures are not decisions, they are drift: a deposit that sat too long, a reconciliation that got skipped in a busy month, a lease template that never got updated after a statute changed. Build the calendar first. Monthly trust reconciliations, an annual review of your lease and disclosure packet against current statutes, and a documented process for deposits and refunds cover the large majority of what an examiner will ask about.

This guide is a starting point for professional managers, not legal advice. For a specific dispute, a novel fact pattern, or anything with real money at stake, work with a California attorney, and confirm the current text of any statute cited above with the California real estate regulator or the California legislature.

Sources

Every fact above is drawn from one of the official sources below.

• Cal. Bus. & Prof. Code § 10131(b), California Legislative Information
• Cal. Bus. & Prof. Code § 10131; DRE license renewal requirements, California DRE
• Cal. Bus. & Prof. Code § 10131.01, California Legislative Information
• Cal. Bus. & Prof. Code § 10148, California Legislative Information
• Cal. Bus. & Prof. Code § 10145, California Legislative Information
• 10 Cal. Code Regs. § 2832 (Commissioner's Regulation 2832), California DRE Reference Book, Ch. 21 Trust Funds
• Cal. Civ. Code § 1950.5(c)(1), California Legislative Information
• Cal. Civ. Code § 1962, California Legislative Information
• Cal. Civ. Code § 1946.2, California Legislative Information
• Cal. Civ. Code § 1954.603, California Legislative Information
• Cal. Civ. Code § 1950.6, California Legislative Information
• Cal. Civ. Code § 1954(a), California Legislative Information
• Cal. Civ. Code § 1947.12(a), California Legislative Information
• Cal. Civ. Code § 1671(d), California Legislative Information
• Cal. Civ. Code § 1954.07, California Legislative Information
• Cal. Gov. Code § 12955, California Legislative Information
• Cal. Gov. Code § 12955 et seq.; CRD housing enforcement, California Civil Rights Department
• Cal. Civ. Code § 1941.1(a), California Legislative Information
• Cal. Civ. Code § 1942.5(a), California Legislative Information
• Cal. Code Civ. Proc. § 1161, California Legislative Information
• California Courts Self-Help Guide, Evictions, California Courts Self-Help