| Rudy Flores · (619) 392-6714 · Real Estate Strategist, Realtor® · CalDRE #02257808 · Responsible Broker CalDRE #01481919
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Renting Out Your First Home: California Landlord Rules

Keeping your San Diego starter home as a rental? The state rent cap, the exemption notice, deposit limits and a checklist to set up before your first tenant.

OWNER GUIDES · NOVEMBER 2026

Updated November 2026 · · Coldwell Banker West

Keeping your starter home as a rental can work out well when the setup is right: a lease with the right statements, a deposit that fits the law, a home that checks the habitability boxes, and a plan for the day you might sell. This guide walks through California’s rules in plain English, then gives you a checklist that narrows itself to your home and a quick way to check a rent increase.

It is general information from Rudy Flores, a real estate agent, not legal or tax advice. A landlord-tenant attorney and a CPA have the final word on your lease and your taxes.

Still deciding between renting it out and selling? The Home Strategy Quiz is four quick questions, and Rudy sends back a personal plan for either path.

Take the Home Strategy Quiz

Build your Rent-Ready Checklist

Answer eight quick questions and the list trims itself to your home: the city, an HOA, the loan, a manager, and whether you’re on orders. Your answers and check marks stay in this browser on this device. Print the list, or send it to Rudy if you’d like him to follow up.

Rudy Flores, Realtor® · Coldwell Banker West · CalDRE #02257808 · Responsible Broker CalDRE #01481919 · (619) 392-6714 · Equal Housing Opportunity · sandiegofirsttimehomebuyer.com

Loan, insurance and HOA

The home itself

The lease and the notices

Advertising and choosing a tenant

Money, records and accounts

If you sell later

A planning checklist, not a legal determination. Talk to a landlord-tenant attorney about your lease and notices.

Before you send it: the four-question Home Strategy Quiz gives Rudy the rest of the picture.

Take the Home Strategy Quiz

California’s rules in plain English

Two sections of the Civil Code do most of the work: 1947.12 limits rent increases and 1946.2 requires a reason, a “just cause,” to end a tenancy. Both reach many rented houses and condos unless an exemption fits.

The state rules for a rented house or condo (Civil Code 1947.12 and 1946.2)
TopicWhat the law says
Rent capOver any 12 months, rent on a covered home can rise by 5% plus the regional cost-of-living change, or 10%, whichever is lower, measured from the lowest rent charged in the prior 12 months. No more than two increases in 12 months. A brand-new tenancy can start at any rent.
This year’s capAbout 8.2% in San Diego County and about 8.7% in Orange County for increases that take effect August 1, 2026 through July 31, 2027, by our math from BLS data; the year before, 8.8% and 8.0%. Confirm with your attorney.
Just causeAfter a tenant has lived there 12 months (24 in some cases when adult tenants are added), ending the tenancy needs a reason the law lists. The no-fault reasons include an owner or close relative moving in, taking the home off the rental market, a government or court order, and demolition or a substantial remodel.
RelocationA no-fault ending comes with relocation help equal to one month’s rent, paid within 15 calendar days of the notice or given as a written waiver of the final month’s rent.
Exemptions owners ask aboutA house or condo that can be sold on its own, when the owner is not a REIT, a corporation or an LLC with a corporate member and the tenant got the state’s written statement; housing with a certificate of occupancy issued within the previous 15 years; and a duplex where you live in the other unit, when neither unit is an ADU. Renting up to two rooms or units in the home you live in is outside the just-cause section; the rent cap has no such exemption, so for the cap one of the exemptions above has to fit.
Where the statement goesIn the rental agreement itself, for tenancies started or renewed on or after July 1, 2020.
Covered homesThe tenant gets the state’s notice about rent limits and just cause, in at least 12-point type, in the lease, an addendum or a signed notice.
How longBoth sections are set to end on January 1, 2030.

The state exemption statement (Civil Code 1947.12(d)(5)(B)(i) and 1946.2(e)(8)(B)(i))

This property is not subject to the rent limits imposed by Section 1947.12 of the Civil Code and is not subject to the just cause requirements of Section 1946.2 of the Civil Code. This property meets the requirements of Sections 1947.12 (d)(5) and 1946.2 (e)(8) of the Civil Code and the owner is not any of the following: (1) a real estate investment trust, as defined by Section 856 of the Internal Revenue Code; (2) a corporation; or (3) a limited liability company in which at least one member is a corporation.

Quoted from leginfo.legislature.ca.gov on November 4, 2026. Your attorney or lease-form provider adds it to your lease.

Calculator

Check a rent increase

Type the lowest rent you charged in the last 12 months and the date the increase would take effect. The check picks the right year’s price index and shows the most the rent could rise to on a home the state cap covers.

Leave out any discount or credit the tenant accepted.
It starts 30 days from today; change it to your date.
Leave it blank to see just the cap.

Weighing a rent increase against selling? The Home Strategy Quiz is four quick questions, and Rudy replies with a plan for your home.

Take the Home Strategy Quiz

Applies only to homes the state cap covers. At most two increases in any 12 months. The rent for a new tenant can be set freely. This is arithmetic from Civil Code 1947.12 and BLS price data, not legal advice.

State rent cap by county and year (our math from BLS CPI-U under Civil Code 1947.12(g); confirm with your attorney)
CountyIncreases taking effectCap
San Diego CountyAugust 1, 2025 through July 31, 20268.8%
San Diego CountyAugust 1, 2026 through July 31, 20278.2%
Orange CountyAugust 1, 2025 through July 31, 20268.0%
Orange CountyAugust 1, 2026 through July 31, 20278.7%

Deposits since AB 12

  • One month, plus the first month’s rent. For security collected since July 1, 2024, a deposit, whatever the lease calls it, can be no more than one month’s rent on top of the first month’s rent.
  • The small-landlord exception. Up to two months’ rent is allowed when the landlord is a natural person, or an LLC whose members are all natural persons, and owns no more than two residential rental properties with no more than four units offered for rent in all.
  • Homes held in a family trust. For that exception, a settlor or beneficiary of a family trust counts as a natural person. California defines a family trust as a revocable living trust or an irrevocable trust whose settlors and beneficiaries are siblings, spouses, domestic partners, children, parents, grandparents or grandchildren of one another (Civil Code 1950.5(c)(5)(C)). Selling a home held in a trust instead? See this guide to selling a trust home.
  • Service member tenants. The two-month exception never applies when the prospective tenant is a service member, and a landlord can’t turn a service member away because of that. Since April 1, 2025, a deposit above your standard amount for a service member, because of credit or housing history, needs a written statement by lease signing, the lease names the return date, and the extra comes back after no more than six months if the rent is current.
  • Photos. For tenancies beginning on or after July 1, 2025, photograph the home right before or at move-in. After move-out, photograph it before any repairs or cleaning you deduct for, and again once the work is done.
  • Returning it. Within 21 calendar days after the tenant moves out, send an itemized statement and the rest of the deposit. Receipts go with it when repair and cleaning deductions together are more than $125. If the deposit or rent was paid electronically, the balance goes back electronically to an account the tenant names in writing, unless you both agree in writing on another way.
  • The walk-through. Before the tenancy ends, tell the tenant in writing that they can ask for an initial inspection, held no earlier than two weeks before move-out, with at least 48 hours’ written notice.
  • One word to leave out. A lease can’t call any part of the deposit “nonrefundable.”

Choosing a tenant, fairly

Fair screening is mostly about writing your standards down and applying them the same way to everyone.

  • Written criteria. Hand your screening criteria to each applicant in writing with the application form.
  • Application fees. A screening fee can cover only your actual out-of-pocket costs, up to the state’s cap (adjusted for inflation each year since 1998). Charge it only when a home is or soon will be available, and either review applications in the order received or refund the applicants you don’t choose, within 7 days of choosing or 30 days after the application, whichever comes first. Give an itemized receipt, and if you pull a credit report, give the applicant a copy within seven days.
  • Vouchers and rental assistance. These count as income, and source of income is protected in California housing. With a government rent subsidy, an income standard looks only at the tenant’s share of the rent, and if you use credit history, the applicant can choose to show ability to pay another way, such as benefit letters, pay records or bank statements (Government Code 12955(o)).
  • Criminal history. The Civil Rights Department says housing providers can’t consider arrests that didn’t lead to a conviction, sealed or expunged records, or juvenile records, and can’t use blanket bans. Its fair housing and criminal history fact sheet has the details.
  • Immigration status. Don’t ask about it, or about citizenship (Civil Code 1940.3).
  • Assistance animals. A no-pets rule bends for service and emotional support animals as a reasonable accommodation, and CRD says there’s no pet deposit or pet rent for them.
  • Ads. Military or veteran status is protected too, so describe the home, never who should live there, and leave out any “no vouchers” style line (Government Code 12955(c)).
  • Language. If you negotiate the lease mainly in Spanish, Chinese, Tagalog, Vietnamese or Korean, give a translation in that language before it is signed (Civil Code 1632).

Getting the home ready

Most of this is a weekend of walking the house with a notepad.

  • Smoke alarms listed by the State Fire Marshal in each dwelling, and a carbon monoxide device where the home has a fuel-burning heater or appliance, a fireplace or an attached garage.
  • The habitability basics in Civil Code 1941.1: weatherproofing, plumbing and gas, hot and cold water, heat, electrical, clean premises at the start, garbage receptacles, and floors, stairways and railings in good repair.
  • A stove and a refrigerator in good working order for leases entered into, amended or extended on or after January 1, 2026. A tenant may choose to bring their own refrigerator, using the lease statement the law spells out.
  • For a home built before 1978: the EPA lead pamphlet, a disclosure of any known lead-based paint or hazards, the Lead Warning Statement in or attached to the lease, and the signed copies kept for three years.
  • Dated photos of every room right before move-in.

Your loan, insurance and HOA

Call your loan servicer first. Ask what your mortgage papers say about living in the home and about renting it out, and get any answer that matters in writing.

Insurance. Ask your insurance agent or broker which policy fits a home you rent out, and suggest renters insurance to your tenant for their own belongings.

HOA. California says an association’s documents can’t prohibit or unreasonably restrict renting a separate interest, or cap rentals below 25% of the homes, and an HOA can ban rentals of 30 days or less. Read your CC&Rs and the association’s rental forms before you list. Talking with a lender about the loan itself? The lender note near the end of this page has a starting point.

If you hire a property manager

A manager you pay to lease the home, find tenants or collect rent is doing work that takes a California real estate license (Business and Professions Code 10131(b)), so look the license up on the DRE public license lookup before you sign. Ask how they screen applicants, how much they can spend on a repair without calling you, and how often they report. This page is not an offer of management or leasing services: Rudy refers no one for property management and takes no fee or anything of value from managers, so the choice is yours.

If you sell later

  • Showings. Give the tenant reasonable written notice to show the home to buyers; 24 hours is presumed reasonable. Once you’ve told the tenant in writing that the home is for sale, notice for showings in the next 120 days can be given in person or by phone, and you leave written evidence of each entry inside the home. The right of access can’t be used to harass a tenant.
  • Timing. Selling isn’t on the list of just causes in state law or in the San Diego or Chula Vista ordinances, while taking the home off the rental market is. Plan the timing with your attorney: a sale with the tenant in place, or a listing after the tenancy ends lawfully.
  • The deposit. At closing it either transfers to the buyer, with a notice to the tenant naming the buyer, or goes back to the tenant with an accounting.
  • Taxes. The home-sale exclusion looks for 24 months of ownership and 24 months as your main home within the 5 years before the sale. Rental time after you last lived there isn’t “nonqualified use,” but gain equal to depreciation allowed or allowable after May 6, 1997 can’t be excluded. Service members on qualified official extended duty can choose to suspend the 5-year period for up to 10 years. A CPA can map your dates.

Run your own numbers with the home-sale exclusion estimator, the keep-or-sell calculator and compare my selling options.

City rules in San Diego County

Some cities add their own layer. Here is where the two biggest differences in the South Bay come from.

Local rules on top of the state’s, for owners
Where the home isWhat changesMore
City of San Diego (check that your address is inside city limits)Just cause from the start of a tenancy, the City’s own exemption statement in the lease, and two months’ relocation for a no-fault ending (three for a senior, 62 or older, or a disabled tenant).San Diego guide
City of Chula Vista (check that your address is inside city limits)Just cause from day one, its own exemption statement, and no 15-year exemption for newer homes.Chula Vista guide
Other cities, such as CoronadoState rules are the baseline; check your city’s municipal code before the first lease.Your city’s code
Unincorporated San Diego CountyCheck the County of San Diego’s current rules before the first lease.County of San Diego
Orange County, including San ClementeState rules are the baseline, and the cap uses the Los Angeles-Long Beach-Anaheim index (about 8.7% for August 1, 2026 through July 31, 2027).San Clemente keep-or-sell page

State law says a home is not subject to both a local just-cause ordinance and the state’s just-cause section (Civil Code 1946.2(i)). Which one governs your home is a question for your attorney.

Common questions

Does the rent cap apply to my single-family home?

It can. A house or condo that can be sold on its own is outside the state cap and the state just-cause rules when the owner is not a REIT, a corporation or an LLC with a corporate member and the tenant received the state’s exemption statement, which belongs in the lease for tenancies started or renewed since July 1, 2020. Housing with a certificate of occupancy issued within the previous 15 years is outside both as well. Without an exemption, the cap applies. Your attorney can confirm which fits your home.

What goes in the exemption statement?

The state’s wording is fixed by Civil Code 1947.12(d)(5)(B)(i), and this page quotes it in full under California’s rules. The City of San Diego and Chula Vista each have their own statement, worded differently from the state’s; the San Diego guide and the Chula Vista guide quote them. Your attorney or lease-form provider can confirm what your lease needs.

How much deposit can I collect?

One month’s rent, on top of the first month’s rent, for security collected since July 1, 2024. A landlord who is a natural person (or an LLC of natural persons, with family-trust settlors and beneficiaries counted as natural persons) and owns no more than two rental properties with four units in all may take up to two months, but never from a service member tenant.

How much can I raise the rent this year?

On a home the state cap covers, increases taking effect August 1, 2026 through July 31, 2027 can be up to about 8.2% in San Diego County and about 8.7% in Orange County, by our math from BLS data, measured from the lowest rent in the prior 12 months. The rent-increase check does the arithmetic for a date you pick. Confirm the figure with your attorney.

Can I sell while it is rented?

Yes. Selling isn’t a just cause for ending a covered tenancy, so the two paths are a sale with the tenant in place or a listing after the tenancy ends lawfully, and showings need proper notice. Plan the timing with your attorney; Rudy can walk you through how a sale with a tenant in place runs.

Will renting it out cost me the home-sale exclusion?

Not automatically. The exclusion looks at 24 months of ownership and 24 months as your main home within the 5 years before the sale, and rental time after you last lived there isn’t nonqualified use. Gain from depreciation can’t be excluded, though. A CPA can check your dates, and the home-sale exclusion estimator gives a first look.

Keep exploring

Talk to a lender. Rates, loan programs and approvals come from lenders, not from websites or real estate agents. Talk to your own mortgage broker, or use our preferred lender, Point Mortgage Corporation (NMLS #231073), at (619) 475-4095. You are always free to choose any lender you like, and you can verify any lender’s license at nmlsconsumeraccess.org.

Rudy does not pay or accept referral fees, and you are always free to choose any lender, attorney, CPA or other professional you like.

General information, not legal or tax advice. Laws and figures change; talk to a landlord-tenant attorney and a CPA about your home. Rudy Flores is a real estate agent, not an attorney or tax adviser.

Sources

General information for orientation, not legal, tax, financial or appraisal advice. Details change; confirm anything that matters with the official source, your lender and your agent.

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