California real estate laws regulate property more tightly than almost any other state’s, and the rules that matter most fall into a handful of areas: how property is taxed, what sellers must disclose, how agents must represent you, how transfers are closed and recorded, how much rent can rise and when a tenant can be evicted, how large a security deposit can be, and who is protected against housing discrimination. Each of these goes further than federal baselines, and several contain traps that catch even experienced buyers and landlords.
Property Tax Under Propositions 13 and 19
Proposition 13, passed in 1978, caps the base property tax rate at 1% of assessed value and limits annual assessment increases to no more than 2%, regardless of what the market does.1Santa Clara County Assessor. Understanding Proposition 13 Voter-approved local bonds and special assessments can push the effective rate somewhat above 1%, but the base holds statewide.
The reset happens on transfer. A sale, inheritance, or other change of ownership triggers a reassessment to current market value. New construction on an existing property also triggers reassessment, but only on the newly built improvements.1Santa Clara County Assessor. Understanding Proposition 13 Two identical homes on one street can carry very different tax bills because of when each was last sold.
Proposition 19, effective in 2021, changed two of those rules. Homeowners who are 55 or older, severely disabled, or victims of a wildfire or natural disaster can transfer their current tax base to a replacement home anywhere in California, up to three times. The replacement can be of any value; if it costs more than the original, the difference is added to the transferred assessed value.2Los Angeles County Assessor. Proposition 19
Proposition 19 also tightened the parent-child and grandparent-grandchild exclusion. An heir can only keep the lower tax base if the property was the parent’s primary residence and the heir makes it their own primary residence within one year. Even then, the exclusion is capped at the current assessed value plus $1 million, adjusted annually for inflation.2Los Angeles County Assessor. Proposition 19 An inherited home turned into a rental or vacation property gets fully reassessed to market value, which can produce a sharp jump in the tax bill.
What Sellers Must Disclose
California puts some of the heaviest disclosure duties in the country on home sellers. The Transfer Disclosure Statement, required by Civil Code Section 1102, applies to sales of residential property with one to four dwelling units.3Justia Law. California Code Civil Code 1102-1102.17 – Disclosures Upon Transfer of Residential Property The seller fills it out from personal knowledge, reporting known defects: roof leaks, foundation problems, plumbing issues, unpermitted work, and the like.
Civil Code Section 1103 adds a Natural Hazard Disclosure covering six designated zones: special flood hazard areas, dam-failure inundation zones, high or very high fire severity zones, wildland fire areas, earthquake fault zones, and seismic hazard zones.4California Legislative Information. California Code Civil Code 1103.2 – Natural Hazard Disclosure Statement Most sellers hire a third-party disclosure company to pull these designations from official maps.
Timing matters. Disclosures should be delivered before the buyer signs the purchase agreement. If they arrive late, the buyer gets a right to cancel: three days after receiving them in person, or five days by mail or electronic delivery.5California Legislative Information. California Code Civil Code 1102.3 Failing to disclose a known defect can lead to damages or rescission after closing, so accurate reporting is the seller’s best protection against fraud claims.
Federal law adds one layer on top. For any home built before 1978, the seller must disclose known lead-based paint hazards and provide the buyer an EPA-approved pamphlet. The buyer also gets a 10-day window to inspect for lead paint before being bound by the contract.
How Agents Must Represent You
California requires real estate agents to spell out, in writing, who they work for. Under Civil Code Section 2079.14, the seller’s agent must provide a standardized disclosure form before the listing agreement is signed, and the buyer’s agent must provide the same form before the buyer signs a representation agreement or submits an offer.6California Legislative Information. California Code Civil Code 2079.14
The form, prescribed by Section 2079.16, sets out what each type of agent owes. A seller’s agent owes fiduciary duties of care, integrity, honesty, and loyalty to the seller while still owing both parties honest dealing and disclosure of facts affecting the property’s value. A buyer’s agent owes the same fiduciary duties to the buyer.
Dual agency, where one broker represents both sides, is legal but constrained. The dual agent cannot tell the seller the buyer would pay more, or tell the buyer the seller would accept less, without express permission from that party.7California Legislative Information. California Code Civil Code 2079.17 The agency relationship must also be confirmed in the purchase contract or a separate signed document before the contract is executed.
Closing, Escrow, and Transfer Taxes
California is an escrow state. A neutral third party holds funds, documents, and instructions until every condition of the sale has been met. Once the purchase agreement is signed, the escrow holder collects the buyer’s deposit, coordinates inspections and loan documents, and releases funds to the seller and the deed to the buyer only when the conditions are satisfied.
After the deed is signed and notarized, it is submitted to the County Recorder’s Office in the county where the property sits. Recording creates a public record of the ownership change and protects the new owner against later claims by anyone unaware of the transfer.
At recording, the county collects a documentary transfer tax. Under Revenue and Taxation Code Section 11911, the rate is $0.55 for every $500 of sale price, which works out to $1.10 per $1,000.8California Legislative Information. California Revenue and Taxation Code 11911 Cities can add up to half the county rate on top. On a $900,000 home, the county portion alone is $990, with a city potentially adding another $495. Some cities have passed voter-approved transfer taxes well above these baselines, so checking the local schedule before closing is worth the time.
A Preliminary Change of Ownership Report should be filed with the deed. It helps the assessor update tax records and determine whether a reassessment applies.9California Legislative Information. California Revenue and Taxation Code 480.3
Rent Caps and Just-Cause Evictions
The Tenant Protection Act of 2019, Assembly Bill 1482, created the state’s first statewide rent cap and just-cause eviction standard. Annual rent increases are limited to 5% plus the local change in the cost of living, with an absolute ceiling of 10%, whichever is lower.10California Legislative Information. AB 1482 Tenant Protection Act of 2019 – Tenancy Rent Caps The increase is measured from the lowest rent charged during the previous 12 months, not the current rent. The law is set to expire on January 1, 2030.
Several property types sit outside the cap:
- Housing that received a certificate of occupancy within the previous 15 years. This is a rolling window, so a building completed in 2012 came under the law in 2027.
- Single-family homes, if the owner is not a corporation, REIT, or LLC with a corporate member, and only if the tenant has received written notice of the exemption.
- Owner-occupied duplexes, as long as the owner lives in one of the two units.
- Deed-restricted affordable housing and dormitories tied to higher education institutions.
Landlords who skip the required written exemption notice lose the benefit of the exemption even when the property otherwise qualifies.10California Legislative Information. AB 1482 Tenant Protection Act of 2019 – Tenancy Rent Caps
Once a tenant has lived in a unit for at least 12 months, the landlord can only end the tenancy for just cause.11California Legislative Information. California Code Civil Code 1946.2 At-fault reasons include nonpayment of rent, violation of a material lease term, criminal activity on the premises, and refusing the landlord lawful access. No-fault reasons cover the owner moving in, substantial renovation, or withdrawal of the property from the rental market.
No-fault evictions carry a cost. The landlord must either pay the tenant relocation assistance equal to one month’s rent or waive the final month’s rent before it comes due.10California Legislative Information. AB 1482 Tenant Protection Act of 2019 – Tenancy Rent Caps Violations of the rent cap or eviction rules can bring civil penalties and the dismissal of an eviction case.
Security Deposit Cap Under AB 12
Assembly Bill 12, effective July 1, 2024, lowered California’s maximum security deposit to one month’s rent for most landlords, whether the unit is furnished or unfurnished.12California Legislative Information. Assembly Bill 12 Before the change, the ceiling was two months’ rent for unfurnished units and three months for furnished ones.
A narrow exception applies to small landlords who are natural persons (not corporations or LLCs with corporate members) and who own no more than two rental properties totaling four or fewer units. They can still collect up to two months’ rent, but the exception does not apply if the prospective tenant is a service member.12California Legislative Information. Assembly Bill 12 The deposit is in addition to the first month’s rent paid at move-in.
Fair Housing Protections Beyond Federal Law
California’s fair housing protections reach further than federal law. The Fair Employment and Housing Act, Government Code Section 12955, bars discrimination in the sale, rental, or financing of housing 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.13California Legislative Information. California Government Code 12955 Several categories, especially source of income and gender identity, go beyond federal fair housing law.
Source of income matters most to landlords in daily practice. The statute defines it to include any lawful, verifiable income, and explicitly covers federal, state, and local housing subsidies such as Section 8 vouchers.14California Legislative Information. California Government Code 12955 A landlord who rejects an applicant solely because rent would be paid with a voucher violates state law. Policies that disproportionately affect a protected group can also violate the law even without discriminatory intent, and violations can bring administrative fines, damages for emotional distress, and the complainant’s attorney fees.