December 2025 Blog
Year-End 2025 Owner Update: What’s New Now — and What’s Coming in 2026 for California Residential Rentals
As we close out 2025, we want to thank each of you for your trust in Pacific Grove Property Management. This has been a year of major legislative changes affecting residential rentals across California, and 2026 brings even more updates that will shape how properties must be operated, documented, and maintained.
Our goal with this annual roundup is to keep you ahead of the curve, reduce liability, and ensure your investment remains compliant, profitable, and well-protected.
Quick Year-End Reminders for Owners (W-9s, Ownership Updates & 1099s)
- Please update your W-9 if anything changed this year—new LLC or trust, updated EIN, new tax address, or ownership name changes. Even small updates require a fresh form on file for accurate 1099 reporting.
- Notify us of any ownership or title changes (trust transfers, added/removed partners, inheritance changes, refinancing with new vesting, etc.). These must be reflected in your year-end documents.
- Remember that income is reported in the year it is received.
Any rent paid in December 2025—even if it applies to January—will appear on your 2025 Form 1099.
Payments received in January 2026 count toward the 2026 tax year, regardless of the rental period covered. - If you received any rent or payments directly (outside our management system), please let us know so your year-end totals accurately reflect gross income.
These small steps help prevent IRS mismatches and ensure timely, accurate tax reporting.
2025 Recap: Key Laws That Now Affect Your Rental Property
1. Security Deposit Caps (AB 12)
This continues to be one of the most impactful changes for our owners.
Under AB 12, security deposits for most California residential rentals are capped at one month’s rent, regardless of whether the home is furnished or unfurnished.
Who can still collect more?
Only a very narrow group of “mom & pop” landlords with no more than two properties totaling four units or fewer may charge up to two months’ rent—and only if the ownership structure meets strict requirements.
Most of our Monterey Peninsula owners are subject to the one-month limit, and we have already updated our leasing practices to comply.
2. Rent Reporting Requirement (AB 2747)
Effective January 2025, landlords must now offer tenants the option to have their on-time rent payments reported to credit bureaus.
This does not require owners to pay for the service.
Tenants may elect to opt in, and they may be charged the actual cost up to $10/month.
We have integrated this into our leasing flow and annual notices and will continue handling the required disclosures on your behalf.
3. Restrictions on “Junk Fees” and Notice Fees (SB 611)
SB 611, effective this year, prohibits landlords from:
- Charging extra fees simply because a tenant pays by check or another lawful payment method
- Charging tenants fees for posting or delivering notices
- Using misleading or buried fee disclosures in lease agreements
We have already refreshed all fee language in our leases to stay compliant.
4. Security Deposit Photo Documentation (AB 2801)
This law now requires both before and after photographic evidence when any portion of a security deposit is withheld.
To protect you, we have implemented a stricter move-in/move-out photo protocol, ensuring:
- Clear “before” photos documenting the unit’s move-in condition
- “After” photos before and after repair or cleaning work
- All photos stored and matched with the itemized security deposit statement
This substantially reduces owner liability and strengthens our ability to defend lawful deductions.
5. AB 1482 Rent Cap Continues
Most multi-unit properties (15+ years old) remain subject to California’s statewide rent cap under the Tenant Protection Act.
Annual increases are limited to:
- 5% + local CPI, or
- 10%,
whichever is lower.
We monitor CPI annually for Monterey County and ensure all increases stay within legal limits.
Looking Ahead: New Laws Taking Effect January 1, 2026
1. Modernized Security Deposit Refund Rules (AB 414)
Beginning in 2026, civil code changes require:
✔ Electronic Refunds
If a tenant paid their deposit electronically, the refund must also be returned electronically (unless everyone agrees otherwise in writing).
✔ Email Delivery Allowed for Deposit Statements
Itemized deductions may now be emailed with written tenant consent—something we will incorporate into our leasing packets.
✔ One Refund for All Roommates
AB 414’s default rule requires issuing one combined refund to all co-tenants unless a written agreement says otherwise.
We are already updating lease templates and internal workflows to reflect these new requirements.
2. Stoves & Refrigerators Now Required in Most Rentals (AB 628)
Beginning with new, renewed, or modified leases on or after January 1, 2026, landlords must provide and maintain:
- A functioning stove
- A functioning refrigerator
This expands California’s official habitability standards.
For owners who historically did not provide appliances, we will reach out individually to coordinate compliant installation and communicate expectations for maintenance and replacement.
3. Eviction Restrictions During Social Security Payment Delays (AB 246)
If a tenant’s Social Security payments are disrupted through no fault of their own, landlords may face temporary restrictions on eviction for nonpayment—provided the tenant supplies documentation.
This rule is in place through January 20, 2029.
Our team will handle verification on your behalf, and we will involve legal counsel when necessary before proceeding with any action involving these circumstances.
2026 Owner Compliance Checklist
Here is what Pacific Grove Property Management is updating on your behalf:
✔ Lease Templates Updated for All 2026 Laws
Includes AB 12, AB 414, AB 2801, SB 611, AB 2747, AB 628, and AB 1482.
✔ Move-In / Move-Out Photo Documentation Standardized
Protects owners from claims and strengthens deposit deductions.
✔ Electronic Deposit Refund Capability Expanded
Aligned with AB 414’s new requirements.
✔ Fee Disclosures Reviewed & Simplified
Ensuring all charges remain legal, transparent, and compliant.
✔ Appliance Requirements Integrated for 2026 Lease Renewals
Stoves and refrigerators provided where required.
✔ Rent Increase Monitoring
We continue to evaluate CPI changes and ensure compliance with AB 1482 and any applicable local ordinances.
✔ Additional Care with Tenants on Social Security
New documentation and notice procedures integrated into our delinquency workflow.
What This Means for You in 2026
California’s rental landscape is becoming more structured, more digital, and more documentary-heavy. The good news: with the right systems in place, compliance becomes straightforward—and risk is sharply reduced.
As your management team, we’ve already built these requirements into our leasing, documentation, inspection, communication, and accounting processes so you don’t have to worry about missing a new rule.
If you would like individualized guidance on how these laws impact your particular property, or if you want to review 2026 lease renewals or rent increase opportunities, we’re here to help.
Thank You for a Successful 2025
We appreciate your partnership and look forward to continuing to protect your investment in 2026 and beyond.
If you have questions, want a portfolio review, or need strategic planning for the year ahead, don’t hesitate to reach out.
Pacific Grove Property Management
Your Monterey Peninsula Property Experts