Since July 1, 2024, California landlords generally cannot collect more than one month’s rent as a security deposit, full stop — AB 12 rewrote Civil Code Section 1950.5 to eliminate the old rule that let landlords charge up to two months for unfurnished units and three months for furnished ones.

If you’re a landlord holding a deposit collected under the old multi-month rule, or you’re selling a rental property with tenants in place, that deposit cap changes what you can legally hold, and a separate 2025 amendment added new photo-documentation requirements on top of it.

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The Rule That Replaced Two Different Caps With One

Before AB 12, Civil Code Section 1950.5 let landlords charge up to two months’ rent as security for an unfurnished unit, or three months’ rent for a furnished one. AB 12 eliminated that distinction entirely.

Under the current statute, a landlord cannot demand or receive security, however it’s labeled, in an amount exceeding one month’s rent, in addition to the first month’s rent itself.

It doesn’t matter whether the unit is furnished or not — the cap is one month’s rent either way, and it applies to anything the statute defines as “security,” which covers any deposit, fee, or charge imposed at the start of a tenancy to cover a landlord’s costs or to serve as an advance payment against future obligations.

This cap only reaches security collected or demanded on or after July 1, 2024.

A deposit that was lawfully collected before that date under the old two- or three-month rule isn’t automatically reduced — the new cap governs what a landlord can demand going forward, not what’s already being held from a lease signed under the prior rule.

That distinction matters most at lease renewal: a landlord who simply rolls an existing tenant onto a new or amended lease without ever increasing the deposit amount doesn’t trigger the current cap on the portion already held, but asking that same tenant for additional security at renewal time does, and the renewal amount has to fit within whichever version of the cap — one month, or two months under the small-landlord exception — currently applies to that landlord.

The Exception Most Landlords Don’t Know Applies to Them

There’s a carve-out in the statute that a lot of small landlords qualify for without realizing it.

A landlord can still charge up to two months’ rent as a security deposit if two things are both true: the landlord is a natural person, or an LLC where every member is a natural person, and the landlord owns no more than two residential rental properties totaling no more than four dwelling units.

A person who is a settlor or beneficiary of a family trust — a revocable or irrevocable trust where the settlors and beneficiaries are related as spouses, domestic partners, siblings, parents, children, grandparents, or grandchildren — still counts as a natural person for this exception.

A landlord renting out a single-family home, a duplex they also live in, or a small handful of units under this four-unit ceiling can still lawfully ask for two months’ rent, while a landlord with a fifth unit anywhere in their portfolio, or one organized as a corporation or a multi-member LLC with any non-natural-person member, is held to the flat one-month cap.

This exception doesn’t apply if the prospective tenant is a service member, as defined under Section 400 of the Military and Veterans Code. A landlord who otherwise qualifies for the two-month exception still can’t use it to charge a service member more than one month’s rent, and can’t refuse to rent to a service member specifically because the one-month cap applies to them.

The Separate Rule for Six-Month-or-Longer Leases

The one-month cap doesn’t prohibit a landlord from collecting an advance rent payment of six months or more if the lease term itself runs six months or longer.

That’s not a security deposit in the statutory sense — it’s prepaid rent — and the statute explicitly carves it out from the deposit cap rather than treating it as a disguised deposit.

A landlord and tenant negotiating a longer lease can still structure a large upfront payment this way, but it has to actually function as advance rent under a lease of that length, not as a security deposit relabeled to dodge the cap.

What a Deposit Can Legally Be Used For

The statute limits what a landlord can actually claim against a security deposit to four categories: unpaid rent, repairing damage beyond ordinary wear and tear, cleaning needed to return the unit to the cleanliness it had at move-in, and remedying a tenant’s failure to restore or return personal property or fixtures covered under the lease.

A landlord cannot assert a claim against the deposit for damage or defective conditions that existed before the tenancy started, for ordinary wear and tear regardless of when it occurred, or for the cumulative wear and tear built up across multiple tenancies.

Claims for materials, supplies, or labor have to be limited to a reasonable amount actually necessary to restore the unit, and a landlord can’t require professional carpet or other cleaning unless it’s genuinely necessary to return the unit to its move-in condition.

The New Photo-Documentation Requirement

A separate set of amendments layered new photo requirements on top of the deposit cap.

Starting April 1, 2025, a landlord has to take photographs of the unit within a reasonable time after getting possession back from a departing tenant, before making any repairs or cleaning that will be charged against the deposit, and again after that work is finished.

For any tenancy that begins on or after July 1, 2025, the landlord also has to photograph the unit at move-in.

When a landlord later sends the tenant an itemized statement of deductions, those move-out and after-repair photos have to go along with it, and can be delivered by mail, email, flash drive, or a link where the tenant can view them online.

A landlord who skips this now has a documentation gap that didn’t used to matter under the old law, and it’s a gap a tenant’s attorney will specifically look for in a dispute over withheld deposit funds.

The Twenty-One-Day Clock on Returning It

Once a tenancy ends, the landlord has 21 calendar days from when the tenant vacates to furnish an itemized statement showing the basis for any amount kept, and to return whatever remains of the deposit.

If repairs genuinely can’t be finished within that window, or the landlord doesn’t yet have invoices from a contractor, the landlord can deduct a good-faith estimate and provide the actual documentation later — within 14 days of finishing the repair or receiving the paperwork.

For deductions totaling $125 or less, the landlord doesn’t have to provide the full documentation package, and a tenant can waive the itemization right under specific, narrow conditions tied to when notice to terminate the tenancy was given.

The Mistake of Treating Extra Fees as Separate From the Cap

The statute defines “security” broadly on purpose: any payment, fee, deposit, or charge imposed at the start of a tenancy to reimburse the landlord for costs of processing a new tenant, or that functions as an advance payment of rent, counts toward the one-month cap — with one specific carve-out for application screening fees, which are governed separately under Civil Code Section 1950.6 rather than treated as part of the security deposit.

A landlord who charges one month’s rent as a deposit and then adds a separate “move-in fee,” a “pet deposit,” or a “key fee” on top of it is very often just relabeling additional security, which still counts against the cap even though it’s billed under a different name.

The statute is explicit that security is covered “however denominated,” which closes off the obvious workaround of calling an extra charge something other than a deposit.

A landlord who wants to charge for a pet generally has to do it through rent itself — a monthly pet rent addition — or stay within the overall one-month limit when that pet charge is collected as an upfront deposit alongside the standard security.

What Happens If a Landlord Gets This Wrong

Retaining a deposit in bad faith, or demanding security in excess of what the statute allows, exposes a landlord to statutory damages of up to twice the amount of the security, on top of actual damages.

A court can award that bad-faith penalty whenever the facts support it, even if the tenant didn’t specifically ask for it.

In any dispute over the amount claimed, the burden of proof is on the landlord to show the amount withheld was reasonable, or that the landlord had the authority to collect whatever amount of security was actually demanded.

A lease also can’t describe any portion of a deposit as “nonrefundable” — the statute flatly prohibits that label regardless of what the lease calls the charge.

How This Follows a Rental Property Through a Sale

Selling a tenant-occupied rental doesn’t erase the deposit obligation — it transfers it.

When a landlord’s interest in the property ends through a sale, the outgoing landlord has to either transfer the remaining deposit, after any lawful deductions, to the new owner and notify the tenant in writing of the transfer and the new owner’s contact information, or return the remaining deposit directly to the tenant with a full accounting.

Before the sale closes, the seller has to give the buyer a written statement showing how much security remains, an itemization of any deductions already made, and which of those two options the seller is choosing.

If the seller skips this step, the buyer becomes jointly and severally liable with the seller for repaying the deposit the tenant is owed, and the buyer can’t demand the tenant post a new deposit to replace money that was never properly transferred.

For an owner selling a tenant-occupied duplex, triplex, or small apartment building, that means the existing security deposits are part of what’s actually being transferred in the deal, not a detail that gets sorted out later.

A buyer’s attorney reviewing a tenant-occupied purchase will typically ask for exactly the written statement the statute requires — the deposit amount, any deductions, and how it’s being handled — and a seller who can’t produce it is handing the buyer a liability that follows the property rather than staying with the seller.

We go through the broader set of landlord obligations that carry over when a tenant-occupied property changes hands in our guide to selling a tenant-occupied property, which is worth reading alongside this one if you’re planning to sell with tenants still in place.

When This Interacts With an Eviction or a Problem Tenancy

The 21-day return deadline and itemized-statement requirement don’t apply when a tenancy ends through certain categories of unlawful detainer judgment — specifically terminations under paragraphs (2), (3), or (4) of Code of Civil Procedure Section 1161, which cover tenancies ended for cause rather than by notice or lease expiration.

That carve-out matters for a landlord dealing with a problem tenant who was removed through the courts rather than one who simply moved out at the end of a lease, since it changes the paperwork obligations that follow.

It doesn’t, however, change the underlying deposit cap or what the landlord can legally deduct — those rules apply regardless of how the tenancy ended.

A landlord considering ending a tenancy for cause before a sale should separately confirm the notice itself meets current requirements, which we cover in our guide to California’s just cause eviction notice under Civil Code 1946.2, since an improperly noticed termination can unwind the whole process regardless of how the deposit itself is handled.

When a Cash Sale Changes the Calculation

Selling a tenant-occupied rental for cash doesn’t remove any of these obligations — the deposit still has to be accounted for and either transferred or returned under the same rules that apply to any sale. What changes is the practical handling.

A cash buyer who already factors tenant-occupied properties into their offer can often absorb the transferred deposit and ongoing landlord obligations as part of the deal without the back-and-forth a retail buyer’s lender might require before approving a loan on an occupied property.

If a prior tenant dispute over a withheld deposit is already in progress, or the landlord never kept the kind of photo and itemization records the current law requires, a direct sale can also mean not having to resolve that paper trail before the transaction closes — though the underlying liability for an improperly withheld deposit still travels with whoever holds it, cash sale or not.

Where a cash sale isn’t the better move: if the rental has long-term, low-maintenance tenants, clean deposit records, and no pending disputes, a landlord may do better listing the property for sale as a stabilized rental investment and letting investor buyers compete on price, since that documentation being in order is exactly what makes the property more attractive to a financed investment buyer in the first place.

What to Check Before You List a Tenant-Occupied Rental

Before putting a tenant-occupied property on the market, a landlord-seller should confirm the deposit amount actually held matches what’s documented in the lease and any amendments, draft the written statement Section 1950.5(j) requires showing the remaining deposit and any deductions, confirm whether the deposit was collected before or after July 1, 2024, since that determines whether the old multi-month amount is still lawfully held, and check whether the small-landlord exception actually applied at the time the deposit was collected — a landlord who has since acquired a fifth unit may be holding a two-month deposit that was legal when collected but would not be legal to demand today.

Most landlords who get caught by this law aren’t trying to cheat a tenant — they’re simply working from whatever deposit amount they’ve always charged, or whatever a template lease they found online told them to collect, without checking whether the rule changed out from under them in mid-2024 and again in 2025.

A landlord who bought a rental property a few years ago and inherited a tenant on a lease signed under the old two-month rule may not realize that renewing or modifying that lease today triggers the current one-month cap on any new or increased security collected going forward.

Keeping a dated copy of the lease, the deposit receipt, and — once a tenant eventually moves out — the move-in and move-out photos required under the 2025 amendments is the simplest way to avoid a dispute that turns what should be a routine security deposit return into a small claims case carrying double damages.

If you’re holding a tenant-occupied rental property with deposit paperwork that’s incomplete, or you’d rather not manage a deposit transfer and the written disclosures a buyer’s attorney will ask for, Cash Home Buyers CA can make a no-obligation cash offer on the property as it stands, tenants and all.

You can read what past sellers have said about working with us at Cash Home Buyers CA on Google.

California’s Security Deposit Cap: How AB 12 Limits What Landlords Can Collect