Property Management Insights for Owners | Coastline Equity

Illegal Property Management Practices in California

Written by John David Sarmiento | May 30, 2025, 2:00:00 PM

For California residential rentals, collecting a deposit above the applicable limit, raising rent without the required notice, using unlawful lease terms or removing a resident outside the court process can violate the law. The rules for a particular rental depend on its location, ownership, tenancy and any applicable exemption.

This guide covers seven areas an owner should review. Statutes and agency guidance were checked on October 5, 2026. It provides general information; it does not determine the legal status of a particular property, lease or proposed action.

1. Raising rent without checking coverage and notice

For covered rentals, Civil Code section 1947.12 limits increases to 5% plus the applicable change in the cost of living, or 10%, whichever is lower. The calculation uses the lowest gross rent in the preceding 12 months. With the same resident in occupancy, the statute also limits increases to two increments in a 12-month period.

New-construction coverage uses a rolling 15-year certificate-of-occupancy test, not a fixed 2005 cutoff. Separately titled homes are not automatically exempt: qualifying ownership and the required written exemption notice both matter. Corporations, real estate investment trusts and LLCs with a corporate member do not meet that ownership condition. Local rent-control rules may impose a lower limit.

For residential periodic tenancies covered by Civil Code section 827, rent increases of 10% or less generally require at least 30 days' notice; increases above 10% generally require at least 90 days. Prior increases in the preceding 12 months count, service by mail affects timing, and specified exceptions or longer requirements can apply. A longer notice does not authorize an increase above an applicable cap.

Before scheduling an increase, assemble the lease, rent history, occupancy information, ownership records and current local rules. That file lets you separate the allowed amount from the notice and delivery requirements. A reminder on a calendar cannot resolve an incorrect coverage assumption.

2. Treating every lease clause as a required or enforceable term

A lease should identify the rent, payment arrangements, deposit, term and each party's responsibilities clearly. Some disclosures depend on the property and the applicable law. For example, a qualifying Tenant Protection Act exemption requires the prescribed notice; a generic statement that a property is exempt is not a substitute.

Smoking, pets and subletting provisions are contract choices subject to applicable law, not a universal list of clauses every California lease must contain. California's fair housing requirements also affect rental policies, including reasonable accommodations. A standard pet restriction does not settle an assistance-animal request.

  • Keep the signed lease and every amendment together, with the version and dates clear.
  • Identify the property-specific disclosures and exemption language you are relying on.
  • Review proposed fees, waivers and policy changes before using them in a new agreement.

Review the form when the law, property facts or proposed terms change. An annual review can be useful, but a calendar date alone does not establish that a clause is valid.

3. Using obsolete deposit caps or an incomplete return process

Civil Code section 1950.5 generally caps new residential security at one month's rent. The two-month exception requires a natural-person landlord or an LLC whose members are all natural persons, with at most two residential rental properties collectively offering at most four units. It excludes prospective service members. Family-trust definitions also apply. The cap change excludes security collected or demanded before July 1, 2024. Furnished status no longer creates the old two-month/three-month limits.

Within 21 calendar days after vacancy, provide the itemized disposition and return the remaining balance. Deductions must be lawful and reasonable; ordinary wear is not chargeable. Repair and cleaning documentation generally accompanies the statement. The $125 combined-repair-and-cleaning exception, permissible waiver and subsequent documentation-request rules need to be read together.

For tenancies beginning July 1, 2025, or later, photographs are required immediately before or at inception. Beginning April 1, 2025, photographs are also required before and after deductible repair or cleaning work following vacancy. The statute addresses providing those photographs, estimates and follow-up documentation. Check its current return-method and multiple-adult-payee requirements too.

A completed statement and a payment are separate parts of the closeout. Keep the condition evidence, calculation, supporting documents and delivery record together so the disposition can be explained later.

4. Choosing an eviction notice by its day count alone

A 30-day or 60-day notice is not a general permission to end a tenancy without a lawful ground. Civil Code section 1946.2 generally requires just cause for covered tenancies after 12 months of continuous lawful occupancy, with additional rules when adult residents join the lease. Its exemptions and local protections must also be checked.

For a covered no-fault termination, the statute requires the stated ground and applicable relocation payment or rent waiver. Curable violations require an opportunity to cure. These are different pathways, not interchangeable versions of a notice.

The California Courts notice guide distinguishes unpaid rent, curable lease violations and other grounds. For example, a three-day rent-demand notice excludes weekends and court holidays and cannot include late fees, utilities or damages. Subsidized housing, federal requirements and local ordinances can change the notice analysis. Have the exact ground, contents, timing and service reviewed for the tenancy before using a form.

The court process includes the notice, filing and service, a response or default pathway, and a court decision. A judgment does not authorize a landlord to carry out a lockout personally. Enforcement through the writ and sheriff follows the court's process. Changing locks or shutting off utilities to force a resident out is not an alternative to that process.

5. Assuming a job title settles licensing requirements

Business and Professions Code section 10131 identifies activities performed for another for compensation that fall within real estate brokerage, including leasing, soliciting prospective renters and collecting rent. Managing your own property is different from performing those activities for another owner.

Section 10131.01 contains specific exceptions, including resident apartment managers and certain limited employee functions under required supervision. An exception for a defined role does not authorize every activity a management firm might perform.

The Department of Real Estate's licensing guidance distinguishes brokers, salespersons working under broker control, and exempt roles. License applicants have qualification requirements; licensed practitioners also have renewal and continuing-education obligations. Before delegating work, identify the activity, the person's role, applicable licensing or exemption, and supervision. Do not assume every person called a property manager must independently pass a licensing exam.

6. Substituting a general inspection claim for actual repair duties

Civil Code section 1941.1 addresses residential conditions such as weather protection, plumbing, hot and cold water, heating, electrical systems, sanitation and safe floors, stairs and railings. For leases entered into, amended or extended on or after January 1, 2026, it also generally requires a working stove and refrigerator, with specified housing exceptions and a permitted resident-provided refrigerator arrangement.

Smoke-alarm requirements include installation and specified testing, maintenance and response duties. Carbon-monoxide device requirements cover existing dwellings with specified fuel-burning equipment, fireplaces or attached garages, along with placement rules. Check the actual building conditions and applicable standards.

Record a reported leak, pest problem or damaged stair as a condition needing a response, not a promise that the property is always mold-free or pest-free. Identify the responsible person, access arrangements and next action, then retain the work performed and the remaining condition. An inspection report should support repair follow-through; it does not by itself prove that a home meets every requirement.

7. Delegating management without defining responsibility

A management agreement should make the work and decision rights clear. Ask who reviews lease versions, prepares notices, tracks deposits, coordinates repairs, monitors deadlines and reports unresolved issues. Establish how property-specific legal questions are escalated rather than assuming a management contract guarantees compliance.

Keep those responsibilities connected to the source records: the signed agreement, coverage determination, rent history, notices, repair evidence and deposit accounting. When a rule or property fact changes, identify which document or action needs review and who owns it.

If you are evaluating professional management for a Southern California multifamily property, review Coastline Equity's management services and request a property management review. Bring the operating issue and management scope you want to discuss.