California Security Deposit Law in 2026: What Landlords Can and Can't Do (AB 12)

If you haven't reviewed your security deposit practices since mid-2024, you may be collecting more than the law allows. California's AB 12 reshaped deposit rules for every residential landlord in the state, and the penalties for getting it wrong are real. Here's a plain-English guide for San Diego owners in 2026.

The one-month cap

Since July 1, 2024, AB 12 limits residential security deposits to one month's rent — whether the unit is furnished or unfurnished. That's a major change from the old norm, which allowed two months' rent for unfurnished units and up to three for furnished.

Just as important: you can't rename the money to get around the cap. Pet deposits, "move-in fees" framed as security, and "last month's rent" collected as security all count toward the one-month limit. If the combined total exceeds one month's rent, it's over the line.

The small-landlord exception

There's a narrow carve-out that lets some owners collect up to two months' rent. To qualify, all of the following must be true:

The landlord is a natural person (or an LLC whose members are all natural persons), and the landlord owns no more than two rental properties that collectively contain no more than four units total.

Even if you qualify, the exception never applies to a tenant who is an active-duty servicemember — those tenants are always capped at one month.

Because the exception is so specific, many small owners assume they qualify when they don't. If you own through a corporation or a larger LLC, or you're over the property/unit thresholds, you're held to the one-month cap.

Returning the deposit: the 21-day rule

When a tenant moves out, you must return the deposit — or an itemized statement of deductions plus any remaining balance — within 21 days. For any individual repair or cleaning deduction over $125, you're required to attach receipts or invoices (or a good-faith estimate, followed by actual documentation). Sloppy or undocumented deductions are one of the most common ways landlords end up owing penalties.

New for 2026 (AB 414): if the tenant paid rent or the deposit electronically, you're now required to return the deposit electronically too — unless you and the tenant have a written agreement for a different method, such as a paper check. This applies to any tenancy ending on or after January 1, 2026. A few related changes travel with it: you generally owe a single refund to all adult tenants (unless they've agreed in writing to a different payee or split), and the itemized deduction statement can now be delivered by email if both sides agree in writing.

2026 compliance checklist

Collect no more than one month's rent in total deposits (unless you clearly meet the small-landlord exception).

Treat pet deposits, move-in fees, and last-month's-rent-as-security as part of the cap.

Always cap active-duty military tenants at one month, regardless of any exception.

Document the unit's condition at move-in (photos, written inspection).

Offer the optional pre-move-out inspection so tenants can fix issues before you deduct.

Return the deposit with an itemized statement within 21 days, with receipts for anything over $125.

Return electronically (AB 414) if the tenant paid rent or the deposit electronically — unless you have a written agreement for another method.

Where owners get tripped up

The most expensive mistakes we see are collecting a separate pet deposit on top of a full month's rent, and making move-out deductions without documentation. Both are easy to avoid with a consistent process — which is exactly what professional management standardizes. Our rent collection and owner reporting workflow keeps deposit handling compliant and documented from move-in to move-out.

If you'd rather not track these rules yourself, talk to our team about managing your property, or explore property management across San Diego County.

Frequently asked questions

How much can a landlord charge for a security deposit in California in 2026?

One month's rent for most landlords, furnished or unfurnished, under AB 12. Some small landlords may charge up to two months.

Do pet deposits count toward the cap?

Yes. Pet deposits, move-in fees framed as security, and last month's rent collected as security all count toward the one-month limit.

Who qualifies for the two-month exception?

A natural person (or an LLC of all natural persons) who owns no more than two rental properties totaling four or fewer units — and it never applies to active-duty military tenants.

How long does a landlord have to return a deposit?

21 days from move-out, with an itemized statement and receipts for any deduction over $125.

Do I have to return a deposit electronically in 2026?

If the tenant paid rent or the deposit electronically, yes — under AB 414 (effective January 1, 2026) you must refund electronically unless you and the tenant have a written agreement for a different method, like a paper check.

This article is general information, not legal advice. California deposit law can change; verify current requirements or consult an attorney before acting.