California Security Deposit Rules for Rental Property Owners

Security deposits generate a disproportionate share of landlord-tenant disputes, and they are among the most winnable — or losable — on paperwork alone. California sets out what you may collect, when you must account for it, and what documentation must accompany any deduction. The rules changed materially in 2024 and again in 2025, so an owner working from older habits is likely out of step.

How much you may collect

Under AB 12, operative July 1, 2024, a landlord may not demand or receive security in excess of an amount equal to one month’s rent, in addition to first month’s rent paid on or before initial occupancy. The single cap applies whether or not the unit is furnished — the older two-tier furnished/unfurnished scheme is gone. The new limit does not apply to security collected or demanded before July 1, 2024.

The small-landlord exception

AB 12 allows up to two months’ rent as security, again in addition to first month’s rent, but only where both of the following are true:

1. 1The landlord is a natural person, or a limited liability company in which all members are natural persons; and
2. 2The landlord owns no more than two residential rental properties that collectively include no more than four dwelling units offered for rent.

The bill defines "natural person" to include a settlor or beneficiary of a family trust, and describes a family trust as a revocable living or irrevocable trust whose settlors and beneficiaries are related as sibling, spouse, domestic partner, child, parent, grandparent, or grandchild.

There is a carve-out on the carve-out: the two-month exception does not apply where the prospective tenant is a service member, who remains subject to the one-month cap. AB 12 also provides that a landlord shall not refuse to enter into a rental agreement with a prospective tenant who is a service member because of that restriction.

"Security" is defined broadly — payments, fees, deposits or charges imposed at the start of a tenancy to cover processing a new tenant, or as advance rent, count toward the cap. Renaming a charge does not move it outside the limit. No lease may characterise any security as "nonrefundable."

The 21-day deadline

After a tenant vacates, the landlord must provide an itemized statement and return the remaining security by personal delivery or first-class mail, postage prepaid, no later than 21 calendar days after the tenant has vacated. The statement must show the basis for and amount of any security received and its disposition. The parties may agree to return the deposit electronically to a bank account the tenant designates.

The statement cannot be sent too early either: not before either party gives notice to terminate, and not earlier than 60 calendar days before a fixed-term lease expires.

Receipts above $125

Where deductions total more than $125, copies of invoices or receipts must be attached to the itemized statement. The requirement does not apply where repairs and cleaning together do not exceed $125, or where the tenant waived the right — and a waiver is only effective if signed at or after the time a termination notice is given, or no earlier than 60 days before lease expiration.

If the landlord or an employee did the work, the statement must describe the work, the time spent, and the reasonable hourly rate charged. "Cleaning — $400" is not an itemization.

The photo requirement

Under AB 2801, beginning April 1, 2025, a landlord must photograph the unit within a reasonable time after possession is returned but before any repairs or cleaning for which a deduction will be made, and again within a reasonable time after that work is completed. Those photographs must be provided at the same time as the itemized statement, along with a written explanation of costs.

The consequence is severe: a landlord who in bad faith fails to comply is barred from making a claim against the tenant or the security. Photos may be delivered by mail, email, flash drive, or a link to view them online.

What you may and may not deduct

Normal wear and tear is the line most disputes turn on. Scuffs, minor carpet wear, and faded paint from ordinary occupancy generally sit on the non-deductible side. A hole in a wall or a pet-destroyed floor generally does not.

The pre-move-out inspection

After a tenant gives notice, the landlord must inform the tenant in writing of the right to request an inspection before moving out, giving the tenant an opportunity to remedy issues first. Owners sometimes treat this as a formality that works against them. In practice it reduces disputes: the tenant either fixes the problem — at no cost to you — or is on notice of what will be deducted and why.

When repairs cannot finish inside 21 days

If a repair cannot reasonably be completed within 21 days, or vendor documents are not yet in the landlord’s possession, the landlord may deduct a good faith estimate and provide that estimate with the itemized statement. Where the delay is missing vendor documentation, the statement must include that person or entity’s name, address, and phone number — and within 14 calendar days of completing the repair or receiving the documentation, the landlord must furnish the required documents.

A practical checklist

1. 1At move-in: dated photographs of every room, plus a condition report signed by the resident. Store both where they will still be findable in four years.
2. 2Confirm which deposit cap applies to you before collecting — one month for most owners, two only if both AB 12 conditions are met.
3. 3On notice to vacate: send the written notice of the right to a pre-move-out inspection.
4. 4On possession returning: photograph before any work begins.
5. 5After the work: photograph again, and keep every vendor invoice.
6. 6Within 21 days: itemized statement, photographs, written explanation of costs, receipts where deductions exceed $125, and the balance returned.

This is exactly the sequence that falls apart when deposit records are scattered across email and a filing cabinet — and the reason deposit records are the item to chase hardest in a management transition. See How to Switch Property Management Companies in Los Angeles.

Official sources

• California Civil Code § 1950.5 — the governing statute
• California Courts self-help guide to security deposits — selfhelp.courts.ca.gov
• AB 12 (2023) and AB 2801 (2024) bill text — leginfo.legislature.ca.gov

Deposit handling, move-in documentation, and the 21-day accounting are part of ordinary full-service management at UnitSimple. See pricing or call to discuss your property.