California’s New Security Deposit Limits Explained

California has adopted a major change to its residential security deposit rules. Under Assembly Bill 12 (AB 12), most landlords are now limited to collecting a maximum of one month’s rent as a security deposit, regardless of whether the rental unit is furnished or unfurnished. This shift is designed to make it easier for renters to secure housing while still allowing certain small landlords a higher cap under specific conditions.

This guide breaks down what the new law does, who it affects, how it interacts with existing Civil Code rules, and practical steps for both landlords and tenants to navigate the updated requirements.

Background: How California Security Deposits Used to Work

Before AB 12, California law allowed substantially higher security deposits. Civil Code Section 1950.5 permitted landlords to request:

• Up to two months’ rent for an unfurnished residential unit.
• Up to three months’ rent for a furnished residential unit.

These amounts included any additional sums collected as pet deposits, cleaning deposits, or other fees intended to cover possible damages or unpaid rent. California law has long treated all such amounts as part of the security deposit, even if they are labeled differently in the lease.

TRENDING

When Your New Home Starts to Settle: Legal Risks & Owner Duties

Learn how home settling works, when it becomes a legal issue, and the responsibilities buyers and sellers face when...

Lease Agreements With Family: Key Benefits and Risks

Learn why written leases with family members can clarify expectations, reduce conflict, and safeguard legal and fin...

How to Rent Out a Garage Safely

Learn how to rent out a garage for parking or storage, set terms, screen users, handle insurance, and avoid common ...

Read More

Legal and Practical Guide to Backyard ADUs >

Tenants already had protections requiring that deposits be returned promptly after move‑out, less allowed deductions, and that landlords provide an itemized statement if any amount is kept. However, the initial cost to move in could still be very high, especially in high‑rent areas where two or three months’ rent represented thousands of dollars.

The New Rule Under AB 12: One Month for Most Landlords

AB 12 amends California Civil Code Section 1950.5 to cap security deposits for most residential tenancies at no more than one month’s rent. The key features are:

• The limit applies to all dwelling units, furnished or unfurnished.
• The cap covers the entire security deposit package — including pet deposits, key deposits, or any other amount collected in advance to secure performance of the lease.
• The new limit applies to security deposits collected on or after July 1, 2024.

For tenants, this means substantially lower up‑front costs. For landlords, it requires revisiting long‑standing practices of collecting larger deposits to manage risk.

Small‑Landlord Exception

The Legislature recognized that smaller property owners may have fewer financial resources to absorb damage or nonpayment. As a result, AB 12 includes a targeted exception.

A landlord may still collect up to two months’ rent as a security deposit if all of the following criteria are met:

• The owner is a natural person, a qualifying limited liability company (LLC with only natural‑person members), or a family trust.
• The owner has no more than two residential rental properties in California.
• The properties together include no more than four dwelling units offered for rent.

If these conditions are satisfied, the landlord can charge up to two months’ rent as the deposit, whether or not the unit is furnished. Large corporate landlords, or owners with more extensive portfolios, do not qualify and must comply with the one‑month cap.

Special Protection for Military Tenants

California law has long included special protections for tenants who are active‑duty military service members, and AB 12 continues this policy. Even if a landlord qualifies as a small landlord under the exception above, the deposit for a military service member tenant is still limited to one month’s rent.

This ensures that service members are not required to post higher deposits simply because their landlord is small or privately owned.

Side‑by‑Side Comparison: Old vs. New Deposit Limits

What Counts as a Security Deposit?

California treats the concept of “security deposit” broadly. A security deposit is any advance amount paid by the tenant to secure performance of the lease, including money to cover potential damage, unpaid rent, or cleaning obligations.

Common examples include:

• General damage deposit.
• Pet deposit or additional amount for animals in the unit.
• Key deposit or garage remote deposit.
• Cleaning deposit or similar amounts held until move‑out.

Under California law, labeling part of the deposit as “non‑refundable” does not change its status. Security deposits must be refundable except to the extent lawful deductions are made for specified reasons, such as unpaid rent or damage beyond ordinary wear and tear.

Rights and Obligations at Move‑Out

AB 12 primarily changes deposit limits, but existing rules on handling deposits after a tenancy ends remain very important. Under Civil Code Section 1950.5:

• Landlords have 21 calendar days after the tenant vacates to either return the full deposit or provide a written, itemized statement of deductions with any remaining balance.
• Allowed deductions generally include unpaid rent, necessary cleaning to return the unit to the same level of cleanliness as at move‑in, and repairs for damage beyond normal wear and tear.
• Routine or automatic cleaning charges that do not relate to actual damage or excess dirt can be challenged.

Recent legislation such as AB 2801 further tightens documentation expectations, requiring photo-based evidence of the unit’s condition before and after tenancy to justify deductions in certain situations. While AB 12 focuses on how much can be collected, landlords should be aware of these related changes to avoid deposit disputes.

Practical Steps for Landlords to Comply

Landlords who operate in California should review their leasing practices to ensure they comply with the new caps. Key steps include:

1. Determine Whether You Qualify as a Small Landlord

• Count your residential rental properties and the total number of rental units in California.
• Confirm ownership structure (natural person, qualifying LLC, or family trust). Corporations and LLCs with corporate members do not meet the exception.
• If you exceed two properties or four units, plan to comply with the one‑month cap for all new deposits.

2. Update Lease Forms and Advertising

• Revise standard lease templates to reflect the new deposit maximums for your portfolio.
• Remove any language suggesting “non‑refundable” deposits for damage or cleaning; such provisions conflict with state law.
• Ensure rental listings and marketing materials state deposit amounts that comply with AB 12.

3. Reassess Risk Management Strategies

Lower deposits may prompt landlords to consider other tools to manage risk, such as:

• Stronger screening of applicants within fair housing requirements.
• Optional third‑party deposit alternatives, if compliant with California law and clearly explained to tenants.
• Clear move‑in condition documentation and thorough pre‑move‑out inspections to reduce disputes.

4. Maintain Proper Accounting and Documentation

• Keep security deposits separate from personal or business operating funds where feasible and maintain clear records.
• Conduct detailed move‑in and move‑out inspections and maintain photographs, condition reports, and invoices for any repairs.
• Provide timely itemized statements within 21 days of move‑out, with copies of supporting documentation if requested.

What Tenants Should Know and Do

Tenants can use AB 12 to better understand their rights at the start of a tenancy and when they move out.

1. Check the Amount of Your Deposit

• For most rentals starting on or after July 1, 2024, expect the deposit to be at or below one month’s rent.
• If your landlord claims a higher amount, ask whether they qualify as a small landlord and request an explanation of how they meet the legal exception.
• If you are an active‑duty service member, verify that your deposit does not exceed one month’s rent, regardless of landlord size.

2. Document the Condition of the Unit

• Photograph the unit thoroughly at move‑in, including any existing damage or wear.
• Request a move‑in checklist from the landlord and keep a copy once completed.
• Before moving out, consider requesting a pre‑move‑out walkthrough so you can fix issues and limit deductions.

3. Monitor Timing and Deductions at Move‑Out

• Mark your calendar for the 21‑day deadline after you vacate; by then you should receive either your deposit or an itemized list of deductions.
• Review the statement carefully and compare it with your photographs and any inspection notes.
• If you disagree with deductions, communicate in writing; if necessary, you may seek legal advice or consider small claims court, where many deposit disputes are resolved.

Frequently Asked Questions (FAQs)

Does AB 12 apply to existing deposits collected before July 1, 2024?

AB 12 applies to security deposits collected on or after July 1, 2024. Deposits that were lawfully collected under the old limits before that date generally do not need to be reduced or refunded solely because of the new cap, though all other laws on handling and returning deposits still apply.

Can a landlord charge separate pet and cleaning deposits beyond the one‑month limit?

No. Under California law, the total security deposit — including pet, cleaning, or other similar amounts — must stay within the applicable cap (one month for most landlords, two months for qualifying small landlords). Breaking the deposit into separate labels does not increase the legal maximum.

Are security deposits ever non‑refundable?

Security deposits are intended to be refundable, less lawful deductions for unpaid rent, cleaning to the original level of cleanliness, and damage beyond normal wear and tear. Lease clauses stating that part of the deposit is automatically non‑refundable can conflict with California law and may be unenforceable.

What happens if a landlord collects more than the legal maximum?

Landlords who collect deposits above the statutory limit may be in violation of Civil Code Section 1950.5. Tenants can request a reduction or refund of the excess amount and, in some cases, may pursue legal remedies or report the issue to local housing authorities or legal aid organizations.

How does AB 2801 relate to AB 12?

AB 12 focuses on how much landlords can collect as a deposit, while AB 2801 changes how deposits are documented and justified, including photo requirements and detailed itemizations of deductions. Together, these laws aim to reduce both the upfront cost of renting and disputes about deposit returns.

Similar Articles

Adding Adult Children to a Lease: A Practical Guide for Landlords

When Your New Home Starts to Settle: Legal Risks & Owner Duties

Lease Agreements With Family: Key Benefits and Risks

How to Rent Out a Garage Safely

Legal and Practical Guide to Backyard ADUs

Managing Multiple Renters in One Unit

Author

medha deb

 

Medha Deb is an editor with a master's degree in Applied Linguistics from the University of Hyderabad. She believes that her qualification has helped her develop a deep understanding of language and its application in various contexts.

Read full bio of medha deb