California rewrote its security deposit rules in the last few years, and the changes bite at both ends of the tenancy: what you can collect on the way in, and what you must document on the way out. All of it lives in Civil Code § 1950.5. Here's what it says now.

The cap: one month's rent, furnished or not

Since July 1, 2024 (AB 12), the security deposit for a residential tenancy is capped at one month's rent. The old rule — two months unfurnished, three months furnished — is gone. Furnished status no longer matters.

"Security deposit" here is a substance-over-labels test. Pet deposits, key deposits, "last month's rent" collected up front — under § 1950.5, payments meant to secure the tenant's performance are all part of the same capped pot. You can't stack a pet deposit on top of a full one-month security deposit and stay under the cap.

The small-landlord exception (and its own exception)

There's one carve-out. You may collect up to two months' rent if both of these are true:

  • You're a natural person (or an LLC whose members are all natural persons), and
  • You own no more than two residential rental properties that together include no more than four units.

Two caveats before you rely on it. First, the moment either condition fails — a third property, a fifth unit, a corporate member in the LLC — you're back at one month. Second, the exception never applies to active-duty service members: if your applicant is a service member, the cap is one month's rent no matter how small a landlord you are.

Move-out: the 21-day clock

After the tenant moves out, you have 21 calendar days to return the deposit along with an itemized statement of any deductions (§ 1950.5(g)). Calendar days, not business days, and the clock starts when the tenant vacates.

What can you deduct? The classic four: unpaid rent, cleaning to return the unit to its move-in condition, repair of damage beyond ordinary wear and tear, and (if the lease allows) restoring or replacing furnishings. Ordinary wear and tear is never deductible — faded paint and carpet worn by normal use are the cost of doing business, not tenant damage.

The itemization has paperwork requirements of its own:

  • If your total deductions exceed $125, you must attach receipts or invoices showing the actual charges. If work was done by your own staff, the statement needs to describe the work, the time spent, and the hourly rate.
  • If repairs genuinely can't be finished within the 21 days, you may send a good-faith estimate within the deadline, then follow up with the final accounting and receipts within 14 days of completing the work.

Miss the 21-day deadline entirely and you can forfeit the right to keep any of the deposit — and a court that finds you retained it in bad faith can award the tenant a penalty of up to twice the deposit on top of the actual amount (§ 1950.5(l)).

The newer layer: photograph everything (AB 2801)

AB 2801 added a photographic-evidence requirement on top of the itemization rules, phased in during 2025:

  • For deductions, you need date-stamped photos of the unit after move-out (and after the repairs or cleaning you're charging for) — in effect for dispositions since April 1, 2025.
  • Since July 1, 2025, the requirement extends to the other end: photos documenting the unit's condition before the tenancy, so there's a baseline to compare against.

The practical rule is simple: a deduction without photos behind it is a deduction you should assume won't survive a dispute. Photograph at move-in, photograph at move-out, photograph after the work is done, and keep the timestamps.

Don't forget the initial inspection

Before any of this, the tenant has the right to request an initial inspection in the final two weeks of the tenancy (§ 1950.5(f)). You walk the unit, give them an itemized list of what you'd deduct as things stand, and they get the chance to fix it themselves before moving out. Offer it in writing — it's required — and treat it as free dispute prevention: every item the tenant cures is an argument you never have.

A move-out checklist that holds up

  1. Offer the initial inspection in writing two weeks before move-out.
  2. Photograph the unit the day the tenant leaves (date-stamped).
  3. Do the work, keep every receipt, photograph the result.
  4. Send the itemized statement, receipts, and refund within 21 calendar days.
  5. If work is still in progress at day 21, send the good-faith estimate on time and the final accounting within 14 days of finishing.

How we handle this at RentierNow

RentierNow warns you at lease-up if a proposed deposit exceeds the AB 12 cap (including the small-landlord and service-member wrinkles), tracks the 21-day disposition deadline per state, and gates deposit deductions on the photo evidence AB 2801 expects. The rules are wired into the workflow, not buried in a help doc.

Collecting or returning deposits in California? Let RentierNow keep the deadlines and paperwork straight.