New Real Estate Laws in California for 2025

Here are new real estate laws in California for 2025. The first two actually started in 2024, but they are worth repeating.

Buyer-Broker Agreement Requirement

If you want to work with a real estate agent to buy a home, a Buyer-Broker agreement must be signed before you and your agent view any properties. This is no different than sellers signing listing agreements with real estate agents to sell their homes. Buyer-Broker agreements are a good thing. It spells out the obligations and responsibilities for both parties. The agreement can be for a particular property or for just for a weekend or even a day. So, if you’re not sure about making a commitment to an agent, you can effectively have a trial period without any long-term commitment. If you have identified a Realtor that you want to work with, then you can sign a Buyer-Broker agreement for a maximum of a three-month period. If the time runs out, then the Buyer-Broker agreement can be extended for as many three-month periods as needed. Agreements can be exclusive or non-exclusive. And depending on exclusivity, they each have their own cancellation terms and policies. With the Buyer-Broker agreement comes the discussion of commissions. It is no longer an automatic assumption that the seller’s broker will pay the buyer’s broker. When you hire a buyer’s agent, you will agree on compensation. Then when you make offer on a property, the commission can be negotiated in the deal, potentially fully or partially off-setting what you owe your agent. For the most part in southern California, we are seeing sellers still willing to compensate the buyers’ agents because it benefits them by potentially getting more offers.

Security Deposit Cap

As of July 1^st 2024, all new residential leases are allowed to only collect one month’s rent as a security deposit. However, if you are a mom & pop investor, and you own no more than four units on two properties, then you are exempt from this law, and you can still collect up to two months’ rent for a security deposit. If your tenant is a service member however, then it’s a one-month cap on the deposit always with no exceptions. In no circumstances going forward, can you collect three months’ rent which owners were previously allowed to do for furnished rentals. This law does not apply to any leases that are already in place; you don’t need to make any changes to them. Also, remember, there is no such thing as a pet deposit or cleaning deposit. Once you hit your cap of one or two months, you can’t add any additional deposit amounts on top of that. In reality, it is always better not to identify a pet deposit because than your coverage is limited to that specific dollar amount rather than the full security deposit. But with a simple “deposit” it covers the damage no matter who caused it. On a side note, it is acceptable to increase the rent for the pet. But remember, an emotional support animal or therapy animal is not a pet. These animals have to be accepted; they are not even required to be on an application. You can request the documentation for the ESA but you can’t ask what the tenant’s disability or need is.

Foreclosure Extensions

If there is a Notice of Trustee Sale on your property and you sign a listing agreement with a Realtor, and deliver the documentation to the Trustee at least 5 days prior to the foreclosure sale, you will get an automatic 45-day extension from the date of the listing agreement. The same things applies to an offer. If you deliver the fully executed purchase agreement to the Trustee at least 5 days prior to the scheduled foreclosure sale, then the foreclosure sale is automatically extended for 45 days. Each of these automatic extensions can be applied only once. Any additional extensions would need to be authorized by the Trustee.

Required of Photos of Damage in Rental Properties

Tenant move-outs just became more complicated with this new law that started April 1, 2025. If you want to keep any portion of the tenants’ deposit, you must take photos of the damage before completing any repairs. Then after the repairs are done, take a new set of photos. You must send the photos along with the paid invoices and balance of the security deposit to the tenant. Remember, if you don’t notify the tenant of the needed repairs within the 21-day deadline, then you lose any right to the security deposit. This law goes one step further… as of July 1, 2025, you will be required to take photos prior to the tenant moving in. So, you will have photos prior to move-in, photos after move-out but before repairs, and photos of completed repairs. Make sure to take close ups and wide angles, and as many photos as possible to be comprehensive and to give context. Video may be a good idea as well. You want to make sure you have enough photographic evidence to prove that the property was in a different condition prior to the tenant’s move-in. Tenants are required to leave the property in the same condition minus ordinary wear & tear.

Limitation on Rental Application Screening Fees

A Rental Property Owner can no longer charge and keep screening fees from multiple applicants. Screening fees must be refunded to those applicants that are not accepted. However, if an applicant fails to meet the Rental Property Owner’s criteria, then the owner does not need to refund the fee. Here are your options:

1. Receive and review one application at a time. If you accept the application, then you are done. If you reject the application, you must return the fee unless the applicant did not meet your criteria which should be in writing and provided prior to the application. Then you move on to the next applicant and screening fee.
2.  Allow any interested parties to submit applications and pay the screening fees up front. Then you must refund the fees for the applicants that are not accepted. Keep in mind, quite often the applicant pays the fee directly to a 3^rd party such as Rentspree, and you are not even collecting the fee. But if you reject the applicant, you still have to refund the fee which means it is coming out of your pocket, creating an extra expense. Also, applicants are still within their rights to submit the applications and credit reports (that you have now paid for) to other properties even though you refunded their fee.
3. Collect the applications first; choose the winning application, and then have that applicant pay for the screening fee for the credit report and other paid portions of the application process.

I will also mention that when an applicant has a paid a screening fee, the Rental Property Owner is required to provide a copy of the consumer credit report within seven days of receipt regardless of whether or not the applicant has requested it. The maximum fee for a credit report is currently $63.50.

Junk Fees

The government has been making efforts to eliminate junk fees across many industries. So now in California, you can no longer charge more rent if a tenant pays by check. And if you tack on extra fees to a tenant’s rent for having bad credit, then if the tenant pays on time for six months, you must refund those fees previously corrected.

Positive Payment History for Credit Scores

What once was an option for Rental Property Owners (RPOs) and Tenants to report property payments to credit bureaus is now mandatory for RPOs who own buildings of more than 15 units, starting April 1, 2025. RPOs must provide notice that Positive Rental Reporting is available. The RPO chooses the credit bureau. The tenant can be charged up to $10 per month for the service. The tenant is given the chance to Opt-In or Opt-Out at the lease signing and every year thereafter. And if a tenant opts-out, the tenant can choose to opt-in once six months have passed. This service is being offered as a way to help tenants build good credit.

Commercial Rental Notifications

Small businesses that have rental terms of month-to-month or shorter must be given longer notification timeframes for rent increases and termination of tenancies. Businesses that are eligible are those with less then 5 employees, restaurants with less than 10 employees or non-profits with less than 20 employees. The business must have attested to the number of employees and their qualification for this law in a written notice in the past 12 months. It is required that they get 90-day notice for a rent increase greater than 10%, and 60-day notice for termination of a lease.

Transfer Disclosure Statement

There is a new section in the TDS related to Domestic Water Storage Tank assistance.

Home Inspection Reports – Drowning Prevention Features

Home Inspection Reports will now include a section that addresses drowning prevention features for pool properties. The home inspector will not do an inspection of these features, but simply list the presence of these features. Features may include pool alarms, security fencing, locked gates, pool safety covers.

Phase Out of Gas Appliances

The statewide ban on new gas furnaces and hot water heaters is supposed to begin in 2030. This regulation does not limit the use or repair of existing furnaces or water heaters. You will not be forced to replace any gas appliances that are currently in use in your home. All new space and water heaters installed after 2030 must be zero-emission appliances. There is currently not a statewide ban yet on other gas appliances although many cities have adopted natural gas bans in new construction over the past few years. To keep it interesting, the federal government does not believe the state can dictate what type of utility a resident uses. So if you sell your home now, there is a new disclosure explaining to a buyer that there is a California law regarding gas bans, but the law may not be enforced because federal law deems it invalid.

SB450 | Tweaks to SB 9 – Subdivisions

SB450 was passed to help encourage more cities in California to push through paperwork faster on lot subdivisions. The wording in the law has been changed to encompass Charter cities which were initially not included in SB9. There are approximately 32 charter cities in the state including Redondo Beach. Some of the charter cities have sued the state in their efforts to maintain control of subdivision approval in their municipalities.

Balcony Inspections Required

After the balcony collapse in northern California and the collapse of the building in Surfside, Florida, laws have been created to help prevent another tragic event. In California, properties of three or more units that have wooden balconies which are at least three feet above the ground and extend six feet from the building, must be inspected for structural integrity. Inspection deadlines for condominiums was Jan 1, 2025. Apartment buildings have until Jan 1 2026 to complete the inspections.

Handyman Work Cap

If you plan to do any home remodeling, you are allowed to hire a handyman to do the work if the project costs no more than $1,000. This is an increase from the previous $500 cap. Anything that will cost more than $1,000 requires a licensed contractor.

HOA Responsibility for Utility Repairs

If you live in a condo and the utilities go out in common areas, and then the problem extends to your unit, the HOA can no longer pass the expense onto you. The HOA must fix and cover the cost of restoring the utilities in the units and not just the common area.

Probate Exception

Lastly, if someone passes away and their total estate is valued at $750,000 or less, probate is no longer required in California. This increased value went into effect on April 1st and expires on March 11, 2028.

Here are three non-real estate related laws that you may find topical:

Cell Phones for Children in School

Beginning January 2026, there will be a limitation or ban on cell phones in schools.

Protection of Child-Influencer Earnings

There are new protections for child-influencers. It must be determined how many minutes a child is on video, and a percentage of the earnings will be retained for the minor in a trust.

Smash & Grab Penalties

AB 1960 has created steeper felony penalties for large-scale felony theft offenses. Courts will impose an enhanced sentence when suspects take, damage, or destroy property valued at over $50,000 when the damage occurs during the act of any felony, including retail theft. The same enhanced sentences will also be applicable to those who knowingly receive stolen property or resell such property.