Security deposits are one of the easiest places for a California landlord to lose money, not by charging too little, but by handling the return wrong. The rules changed meaningfully in recent years, and the penalties for a mistake can be larger than the deposit itself. This guide walks through the current limits, what you can deduct, the strict return deadline, and how to protect yourself.
This is general information, not legal advice. Figures and rules change, so confirm the current requirements for your property before acting.
Under AB 12, which amended California Civil Code 1950.5, security deposits collected on or after July 1, 2024 are generally capped at one month's rent, whether the unit is furnished or unfurnished. This was a significant change from the old rule, which allowed up to two months' rent for unfurnished units and three for furnished.
Deposits that were already collected under leases signed before that date, at the prior higher limit, generally remain valid. The cap applies to new deposits going forward.
There is a limited exception. A landlord who is a natural person, or an LLC whose members are all natural persons, and who owns no more than two residential rental properties that together contain no more than four units, may collect up to two months' rent. The exact wording matters, so confirm you qualify before relying on it.
One carve-out is clear cut: for a service member tenant, the deposit is limited to one month's rent regardless of the landlord's size or the property type.
If you are not certain whether the small-landlord exception applies to you, charge one month and move on. The exception is narrow, and over-collecting is not worth the dispute.
California lets you deduct from the deposit only for specific things:
You cannot deduct for normal wear and tear, the ordinary aging that happens with everyday use. Faded paint, minor carpet wear, and small nail holes are generally the owner's cost, not the tenant's.
This is the deadline that trips owners up. Within 21 days after the tenant moves out, you must either return the full deposit or deliver an itemized statement of deductions along with any remaining balance. If any single repair or cleaning deduction, or the total, crosses the statutory threshold (roughly $125), you must also include copies of receipts or invoices for the work.
Miss the 21 days, or keep part of the deposit in bad faith, and a court can award the tenant up to twice the deposit amount in statutory damages, on top of the amount wrongly withheld, plus attorney fees. The deadline is not flexible.
Tenants have the right to request an initial inspection before they move out, so they can fix issues and avoid deductions. If a tenant requests it, you must offer the inspection and give them an itemized list of proposed deductions so they have a chance to cure. Handling this step well prevents most deposit disputes before they start.
If you also own in the Las Vegas area, the rules are different. Nevada allows a security deposit of up to three months' rent and requires the deposit to be returned, with an itemized statement of any deductions, within 30 days of the tenancy ending. The discipline is the same in both states: document the condition, deduct only what is allowed, and meet the deadline.
The deposit rules reward owners who are organized and punish those who are not. Charge within the cap, deduct only what the law allows, document everything, and hit the 21-day deadline every time. This is exactly the kind of deadline-driven, penalty-heavy task that professional management exists to handle, so a late statement never turns a normal move-out into a lawsuit.
We handle move-out inspections, itemized statements, and the 21-day clock across California and Las Vegas. Start with a free assessment.
Schedule Free AssessmentThis article is general information for rental owners and is not legal advice. Laws and dollar thresholds change. Confirm the current text of California Civil Code 1950.5 and the rules for your specific property before acting.