California Security Deposit Laws 2026: AB 12 One-Month Cap, Small Landlord Exception, and Civil Code §1950.5 Complete Guide

1. The AB 12 Change: Old Cap vs. New Cap

Before July 1, 2024, California Civil Code §1950.5(c) permitted landlords to collect a security deposit of up to two months’ rent for an unfurnished unit and up to three months’ rent for a furnished unit. That dual structure had been in place since the original 1976 enactment of §1950.5 and had not been adjusted for inflation, meaning a landlord in San Francisco could collect a deposit exceeding $10,000 on a two-bedroom unit while the security deposit in most other states remained far lower.

Assembly Bill 12, signed by Governor Newsom on October 11, 2023, collapsed the furnishing distinction and cut the maximum to one month’s rent for all residential tenancies — unfurnished or furnished — commencing on or after July 1, 2024. The amendment was codified in §1950.5(c)(1). The small landlord exception is in §1950.5(c)(2), discussed in Section 3 below.

The one-month cap applies to new tenancies. A lease that commenced before July 1, 2024 and remains in its original term is governed by the pre-AB 12 limits for the deposits collected at that time. When the tenancy is renewed on or after July 1, 2024, the landlord should not collect any additional deposit that would cause the total held to exceed the new one-month cap, and should refund any excess held above that cap as part of the renewal. Landlords who continue to hold excess deposits on pre-existing tenancies without adjustment face the risk that a court will treat the excess as held in bad faith if a deposit dispute arises.

2. What Counts as a Security Deposit Under §1950.5

Civil Code §1950.5(b) defines “security deposit” broadly, catching many amounts that landlords label as something other than a deposit:

“[A]ny payment, fee, deposit, or charge, including, but not limited to, any payment, fee, deposit, or charge imposed at the inception of the tenancy to be used to reimburse the landlord for costs associated with processing a new tenant or any other payment, fee, deposit, or charge imposed as an incident of a tenancy, other than the payment of the first month’s rent.”

The statutory sweep is wide. Every one of the following amounts counts toward the cap:

• Damage deposit — the classic security deposit.
• Cleaning deposit — a separate pre-collected amount purportedly for post-move-out cleaning. Prohibited as a non-refundable charge; if labeled as a cleaning deposit that is refundable on surrender in clean condition, it counts against the cap.
• Pet deposit — a separate deposit for a pet. Counts against the cap. The combined total of all deposits may not exceed one month’s rent.
• Last month’s rent — if the landlord collects an amount representing the last month’s rent at the commencement of the tenancy and holds it until the tenancy ends, that amount is a security deposit. It is subject to the same §1950.5 itemization and return obligations as any other deposit amount when the tenancy ends.
• Key deposit, parking deposit, storage deposit — all count.

What Does Not Count

• First month’s rent — the current month’s rent collected at move-in is expressly excluded from the definition. A landlord may collect first month’s rent plus up to one month’s security deposit, giving a maximum move-in amount of two months’ equivalent under the general rule.
• Application fee — a screening fee not to exceed the actual cost of the credit report and background check (capped by Civil Code §1950.6 at the actual costs, generally $30–$50 range) is not a security deposit.

Non-Refundable Deposits Are Prohibited

California Civil Code §1950.5(b) states explicitly that “any deposit shall be refundable.” A landlord may not charge a non-refundable cleaning fee, non-refundable pet fee, or any other non-refundable amount at the inception of the tenancy (other than a lawful application fee). Any lease clause purporting to make a deposit non-refundable is void and unenforceable. If a landlord collects what is labeled a non-refundable deposit and the tenant disputes it, a court will treat the retained amount as a wrongfully withheld security deposit subject to the two-times bad-faith penalty.

3. The Small Landlord Exception

Civil Code §1950.5(c)(2) creates an exception to the one-month cap for “a landlord who is a natural person and who owns no more than two residential rental properties that together contain no more than four dwelling units offered for rent.” Under this exception, such a landlord may still charge:

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

The qualifying criteria are strict, and several points deserve emphasis:

“Natural Person” Requirement

The exception applies only to an individual human being who owns the properties in their own name. A landlord who holds their rentals in an LLC, corporation, trust, or general partnership does not qualify, even if they are the sole member, sole officer, or sole trustee. Many California small landlords who created an LLC for liability protection lost access to this exception without realizing it. If the title is held in the name of “Jane Smith Revocable Trust” or “Smith Rentals LLC,” the one-month cap applies.

Property Count Test

The landlord must own no more than two residential rental properties that together contain no more than four dwelling units offered for rent. A landlord who individually owns a duplex (2 units on one parcel) and a single-family home (1 unit) — three units total across two properties — qualifies. A landlord who owns a fourplex (4 units, 1 property) qualifies. A landlord who owns one duplex and a triplex (5 units across two properties) does not qualify because the total exceeds four dwelling units, even though only two properties are involved. The test is conjunctive: both the property count (≤2) AND the unit count (≤4) must be met.

Documenting the Exception

If you are relying on the small landlord exception, note in the lease exactly which units and properties you own and include a statement that you are a natural person qualifying under §1950.5(c)(2). If you are ever asked to justify a deposit exceeding one month’s rent in court or before a housing department, the burden is on you to prove the exception applies. Keep documentation (property tax records, title documents, deed records) showing ownership count and unit count at the time the tenancy commenced.

4. Active-Duty Military: No Exception

California SB 644 (2015), codified at Civil Code §1950.5(c)(3), limits the security deposit to one month’s rent whenever a prospective tenant is or will be an active-duty service member. This provision predates AB 12 and was not changed by it. The active-duty cap is absolute: even a qualifying small landlord cannot charge more than one month’s rent if the tenant presents evidence of active-duty military status.

If a tenant becomes active-duty after the tenancy commences, the landlord is not required to retroactively reduce a deposit lawfully collected before the military service began. The one-month military cap applies at the inception of the tenancy based on the prospective tenant’s known status at that time.

5. The 21-Day Return Obligation

Civil Code §1950.5(g)(1) requires that, within 21 calendar days after the tenant vacates the premises, the landlord must do one of two things:

1. Return the entire security deposit by personal delivery or by first-class mail, or
2. Provide by personal delivery or first-class mail: (a) a written itemized statement of the basis for and the amount of any security deposit deductions, and (b) any remaining deposit balance not withheld.

The 21-day clock starts from the date the tenant actually surrenders possession — meaning the date the tenant hands over the keys, moves out, and gives up control of the unit — not from the date the lease expires or the date the landlord discovers the tenant has left. If a tenant leaves belongings behind and cannot be reached, the landlord should document the date of actual surrender carefully.

What If Repairs Aren’t Finished in 21 Days?

If the repair work cannot be completed within 21 days because contractors are not available, the landlord may still satisfy the return obligation by providing within 21 days: a good-faith written description and itemized estimate of the work to be done and the cost. The landlord must then complete the actual work and send the final itemized receipts within 14 calendar days of completion — and the work must be completed within a reasonable time after the tenant vacates. The landlord cannot indefinitely defer the repair, run up costs, and then charge the tenant months later. Courts have held that excessive delay in completing work, combined with using deposit funds to pay for the work, can independently establish bad faith under §1950.5(l).

Mailing vs. Delivery

The statute permits mailing by first-class mail. Use certified mail with return receipt if you are mailing a check and itemization — this creates a paper trail of the date of transmission. Mailing to the last known address (the rental unit address unless the tenant has provided a forwarding address) satisfies the obligation. If the tenant has not provided a forwarding address and the landlord sends the deposit to the unit address within 21 days, the obligation is satisfied even if the letter is returned undelivered.

6. Allowable Deductions

Under Civil Code §1950.5(b), the landlord may only deduct for four categories of costs:

1. Unpaid Rent

Any rent, including prorated last-month rent, that is owed and unpaid at the time the tenant vacates. The landlord should document the exact amount owed and the basis for the calculation (lease, payment history).

2. Cleaning Costs

The reasonable cost of cleaning the unit necessary to restore it to the same level of cleanliness it was in at the commencement of the tenancy. The baseline is the condition at move-in, not a higher standard the landlord may prefer. If the landlord provided a freshly professionally cleaned unit at move-in, the cleaning standard at vacate is that condition. If the unit was not professionally cleaned at move-in, the landlord cannot charge for professional cleaning on exit unless the tenant left the unit in a worse condition than when they received it.

3. Repair of Damage Beyond Normal Wear and Tear

The cost to repair physical damage caused by the tenant, their occupants, or their guests — beyond what would be expected from ordinary occupancy over time. Damage must be causally linked to the tenant’s conduct or neglect, not pre-existing conditions or building deterioration. See Section 7 for the normal wear and tear analysis.

4. Future Restoration Costs

If a lease permits the tenant to make alterations to the unit (custom paint colors, installed fixtures) and the lease requires restoration, the cost of restoring the unit to its original condition may be deducted. This must be documented with signed contractor invoices or a detailed written estimate.

Documentation Requirements

Civil Code §1950.5(g)(2) requires that the itemized statement of deductions must include copies of documents showing the amounts charged — typically receipts from contractors or vendors, or signed invoices. Generic line items like “cleaning: $400” without supporting documentation risk being challenged as bad faith if the tenant disputes them. For repairs not yet completed at the 21-day mark, a written good-faith estimate with contractor name and description of work satisfies the documentation requirement at that point.

7. Normal Wear and Tear: What It Is and Isn’t

The single most litigated issue in California security deposit cases is the line between normal wear and tear (not deductible) and damage beyond normal wear and tear (deductible). California courts and the Department of Consumer Affairs have developed a working standard: normal wear and tear is the deterioration that results from ordinary, reasonable use of the unit over time — without negligence, carelessness, accident, or deliberate misuse.

Not Deductible (Normal Wear and Tear)

• Minor scuffs, marks, or rub marks on walls from furniture positioned against them over a multi-year tenancy.
• Faded, slightly discolored, or chalky paint from sunlight and normal aging — especially in southern California climates where UV exposure is high.
• Small nail holes or picture-hanging holes in ordinary locations (one hole per 10 square feet of wall has been cited as a reasonable benchmark in some court decisions, though not codified).
• Worn carpet in high-traffic paths (from entryway to kitchen, along hallways) from ordinary foot traffic, with no staining.
• Worn or slightly stiff door hardware, cabinet hinges, or drawer glides from years of use.
• Minor scratches on hardwood floors consistent with normal household use (dragging a chair, rolling furniture on felt pads).
• Light lime scale or water stains around faucets in hard-water areas.
• Toilet seats that show aging, discoloration, or minor crazing consistent with normal use over several years.

Deductible (Damage Beyond Normal Wear and Tear)

• Large holes in drywall, gouged or punched surfaces.
• Carpet with pet urine stains, large food stains, burns, or tears.
• Unauthorized painting in strong or non-neutral colors, or painting over mold without remediation.
• Broken window glass, cracked mirrors, or broken blinds.
• Grease-coated oven interior, range hood, or walls near the stove from failure to clean over the tenancy period.
• Deep gouges or scratches in hardwood floors from dragging furniture without pads, or from pet nails.
• Mold growth in bathroom or kitchen areas caused by tenant failure to ventilate (where the building provides adequate ventilation and the issue is not a structural defect).
• Damage caused by unauthorized installation or removal of fixtures (drilling into tile, removing built-in cabinetry).

The Tenancy Length Factor

Courts consistently consider the length of the tenancy when evaluating what is normal wear. A carpet worn thin in a heavily trafficked area after an eight-year tenancy is almost certainly normal wear; the same condition after six months raises legitimate questions. Landlords should prorate estimated useful life of flooring, paint, and appliances against the tenancy period — a landlord who charges a full carpet replacement on a six-year-old carpet after a five-year tenancy will likely lose that deduction in small claims court because the carpet was already near the end of its useful life regardless of the tenant’s conduct.

8. Pre-Move-Out Inspection Rights

Civil Code §1950.5(f)(1) grants tenants the right to request a pre-move-out inspection, and imposes obligations on the landlord to honor that right. The procedure works as follows:

1. Tenant request. The tenant (or the landlord proactively) may request a pre-move-out inspection during the last two weeks of the tenancy.
2. Landlord notice. The landlord must give the tenant at least 48 hours’ advance written notice of the date and time of the inspection. The inspection must occur at a mutually agreed upon time.
3. Written itemized list. Immediately after the inspection, the landlord must give the tenant a written, itemized statement of items that, if not repaired or cleaned before the tenant vacates, will be deducted from the security deposit.
4. Cure opportunity. The tenant then has the period between the inspection and the final surrender date to remedy the listed items. Items successfully remedied cannot be deducted.
5. Inspection limitation. Items not identified during the pre-move-out inspection generally cannot be charged against the deposit after final surrender, unless the damage was caused after the inspection, was concealed during the inspection, or was not discoverable through a reasonably diligent inspection.

Landlords who routinely skip the pre-move-out inspection process, or who provide the tenant no opportunity to remedy items, expose themselves to significant bad-faith risk. If a landlord withholds the deposit for items that could have been identified and cured in a pre-move-out inspection, courts are likely to view that withholding skeptically — particularly where the landlord did not inform the tenant of the right to request an inspection.

Best practice: send a written move-out packet to the tenant 30 days before the lease end that (1) offers the pre-move-out inspection, (2) includes a checklist of what the landlord will evaluate, and (3) reminds the tenant of the surrender process. This documentation protects the landlord if a dispute arises and demonstrates good faith.

9. Bad-Faith Withholding: The 2× Penalty

Civil Code §1950.5(l) is the statute’s enforcement mechanism. It provides that if a court finds the landlord acted in bad faith in retaining a security deposit (or any portion of it), the court shall award the tenant:

• The amount wrongfully withheld, plus
• A civil penalty of up to twice the amount wrongfully withheld.

Combined, this is a maximum recovery of three times the wrongfully withheld amount. Attorney fees are also available to a prevailing tenant. Courts have found bad faith in the following circumstances, among others:

• Withholding the entire deposit with no itemization and no return within 21 days.
• Retaining the deposit for items that are clearly normal wear and tear (e.g., repainting a unit at tenant’s expense after a five-year tenancy when the paint was already aging).
• Charging cleaning fees when the tenant documented a clean move-out with photographs and the landlord provides no evidence the unit needed cleaning beyond normal use.
• Retaining a deposit labeled a “non-refundable cleaning fee” or “non-refundable pet fee” — those are prohibited deposits and automatic bad faith.
• Fabricating or inflating repair invoices.
• Making deductions for damage shown in the move-in inspection report or pre-existing documentation.

Practical Stakes

For a typical California small landlord with a $2,500/month unit, a one-month deposit is $2,500. If that deposit is wrongfully withheld in bad faith, the mandatory penalty under §1950.5(l) is up to $5,000 (2×), for a combined tenant recovery of $7,500 — plus the tenant’s attorney fees if they retain counsel. Most such cases are litigated in small claims court (no attorneys, $12,500 ceiling), where landlords regularly lose deposit disputes because they cannot produce receipts, photos, or pre-move-out inspection documentation.

The practical lesson: document move-in condition with photographs and a written checklist signed by the tenant; document move-out condition the same way; retain copies of all invoices; honor the 21-day deadline; and do not deduct for normal wear. The two-times penalty is not a litigation anomaly — it is routine in California small claims deposit disputes where the landlord failed to document.

10. Local RSO Overlays: SF, LA, Oakland

Civil Code §1950.5 sets the statewide floor. Local rent stabilization ordinances in some cities add requirements on top of the state baseline. Landlords in covered cities must satisfy both.

San Francisco: Security Deposit Interest

San Francisco Administrative Code §49.2 requires landlords of SF Rent Ordinance-covered units to pay annual interest on security deposits. The San Francisco Rent Board sets the rate each year based on the passbook savings account interest rate; for 2026 the rate is approximately 2.7% (confirm the current rate at the SF Rent Board’s official website before paying). Interest accrues from the date the deposit is received and must be paid to the tenant annually, either on the anniversary of the tenancy or as a credit or payment at move-out. A landlord who fails to pay the required annual interest forfeits certain rights to withhold the deposit for some purposes under the SF Rent Ordinance. San Francisco also has detailed itemization and return procedures that run parallel to, and in some respects are stricter than, the state §1950.5 requirements.

Los Angeles: RSO Deposit Tracking

The Los Angeles RSO (LAMC §151) applies to buildings built before October 1978 and covered by Los Angeles’s rent stabilization program. The LA RSO does not require interest on security deposits but does impose obligations on landlords to provide itemized statements of deposit deductions consistent with or stricter than the state requirements. LA also has extensive tenant notification requirements that must be met within the first 30 days of the tenancy, including notice of the RSO, tenant rights, and the amount and form of any security deposit held. Failure to provide these notices may affect the landlord’s ability to withhold deposits.

Oakland and Berkeley

Both the Oakland Rent Adjustment Program (OMC §8.22) and Berkeley Rent Stabilization Ordinance (BMC §13.76) impose just-cause and rent increase obligations on covered buildings that interact with deposit practices — for example, a landlord who improperly collects excess deposits may find the excess characterized as unpermitted rent in Oakland under certain circumstances. Neither Oakland nor Berkeley currently requires security deposit interest payments, though the Oakland RSO has considered such requirements at various points.

For landlords in Sacramento, San Jose, San Diego, Fresno, Long Beach, and other California cities without a local RSO, Civil Code §1950.5 is the only applicable security deposit statute. See Sacramento, San Jose, San Diego, Fresno, and Long Beach pages for the applicable AB 1482 rent cap details in those cities.

11. Five Common Landlord Mistakes

1. Collecting a Separate “Pet Deposit” on Top of the Security Deposit

A pet deposit counts toward the one-month cap under §1950.5(b). A landlord who collects a $2,000 security deposit and a separate $500 “pet deposit” on a $2,000/month unit has collected $500 in excess of the cap — and may face a bad-faith penalty on that excess if the pet deposit is later challenged. If you want to protect against pet damage, charge one deposit at the cap and document pet-related damage carefully at move-out.

2. Confusing Last Month’s Rent With the Security Deposit

Last month’s rent collected upfront is a security deposit under §1950.5(b) and counts against the cap. If you collect first month, last month, and a separate damage deposit, you have collected two months’ worth of deposit — which exceeds the one-month cap for most landlords. The only exception: if you are a qualifying small landlord and the unit is unfurnished, the two-month cap still applies and you could lawfully collect last month’s rent as one of the two months.

3. Missing the 21-Day Deadline

The 21-day clock is absolute. There is no extension for the landlord being out of town, waiting for a contractor estimate, or being unsure of the deduction amounts. If you cannot provide final itemization within 21 days, provide a good-faith estimate with a contractor name and description of work by day 21 and send final receipts within 14 days of completing the work. Calendar the surrender date and set a day-15 reminder so you have six days to gather documentation before the deadline.

4. Charging for Pre-Existing Damage

If the move-in inspection checklist — signed by the tenant — documented a stain on the carpet, a cracked baseboard, or a scuffed wall, those items cannot be charged against the deposit at move-out. Any deduction for pre-existing damage is automatic bad faith. Conduct a detailed move-in inspection with photographs, have the tenant sign the checklist, and keep copies. This single practice prevents more deposit disputes than any other.

5. Relying on Non-Refundable Labels

Any upfront charge labeled “non-refundable” — cleaning fee, pet fee, administrative fee — is void under §1950.5(b) if it serves any of the purposes described in the definition. Charging a $200 non-refundable administrative fee at move-in, retaining it, and then facing a tenant who files in small claims court will typically result in an award of $600 (3×) plus small claims filing fees, for a loss that far exceeds the $200 collected. Non-refundable screening fees are governed by §1950.6, not §1950.5, and are limited to actual costs of credit and background checks.