California Security Deposit Law 2026: What Landlords Can & Can't Do

California's deposit rules have tightened on every front — how much you can collect, what you must photograph, when you must pay, and how you must send the money. In 2026, the margin for error is thin, and the penalties are real.

Knowing precisely what you can and can't do protects your portfolio, keeps tenant relationships positive, and helps you avoid statutory penalties. Here's the current framework. (For the full compliance picture, see our 2026 California rental law guide.)

1. The Deposit Cap Rules (AB 12 Recap)

• What you CAN do: Charge a maximum of one month's rent for most residential properties, furnished or unfurnished.
• The small-landlord exception: A natural person (or an LLC of entirely natural persons) who owns no more than 2 residential properties totaling no more than 4 units may charge up to two months' rent.
• What you CAN'T do: Charge active-duty service members more than one month's rent, regardless of portfolio size. Never collect non-refundable holding fees, "cleaning deposits," or separate pet deposits — all security is unified under Civil Code § 1950.5.

2. Move-In & Move-Out Documentation (AB 2801)

Documentation is now a statutory requirement, not a best practice. If you plan to deduct for damage, your photo trail must be bulletproof.

• What you CAN do: Secure your right to deduct by capturing timestamped photos before or at the start of tenancy, after the tenant vacates but before repairs, and after work is completed.
• What you CAN'T do: Deduct for damage or cleaning without matching move-in baseline photos. Skipping move-in evidence means forfeiting your right to those funds — even if the damage is legitimate. Bad-faith failures can lead courts to invalidate deductions entirely.

3. Deadlines, Deductions & the Electronic Return Mandate (AB 414)

• The 21-day absolute clock: Return the remaining balance with an itemized statement and receipts (for any cost over $125) within 21 calendar days of the tenant surrendering possession.
• The electronic refund mandate: If the tenant paid the deposit or rent electronically, you must return the balance electronically (ACH or direct deposit) by default. A paper check is only allowed if both parties sign a written agreement designating it.
• Multi-tenant accounting: With multiple adult co-signers, the refund must be a single payment payable to all adult tenants unless all sign an agreement for an alternative split.
• What you CAN'T do: Sit on the deposit past 21 days or withhold in bad faith — that exposes you to judgments of up to twice the wrongfully withheld amount, plus actual damages and legal fees.

4. What You Can & Can't Deduct (The Wear-and-Tear Matrix)

Distinguishing tenant-caused damage from natural aging protects your accounting from legal challenge.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Deposit rules are complex and subject to change; verify your obligations with a qualified California attorney before withholding any portion of a deposit.