California Security Deposit Laws: What Every Landlord Must Know in 2025

Security deposits represent one of the most regulated aspects of landlord-tenant relationships in California. State law dictates how much you can collect, where you can keep the funds, what deductions are permitted, and exactly how and when deposits must be returned. Mistakes in any of these areas can result in landlords owing tenants up to twice the deposit amount in penalties, plus attorney fees.

This guide provides California landlords with a complete understanding of security deposit regulations, including recent changes under AB 12 that significantly reduced maximum deposit amounts. Whether you manage rentals in Sacramento, Roseville, Folsom, or anywhere in Northern California, these rules apply uniformly across the state.

California Security Deposit Limits: What AB 12 Changed

Assembly Bill 12, effective July 1, 2024, dramatically changed California's security deposit limits. Understanding these new rules is essential for any landlord collecting deposits on new leases or renewals.

Current Maximum Security Deposit Amounts

Under AB 12, all California landlords are limited to collecting a maximum security deposit of one month's rent, regardless of whether the unit is furnished or unfurnished. This represents a significant reduction from the previous limits of two months' rent for unfurnished units and three months' rent for furnished units.

The new limit applies to:

• All new lease agreements signed on or after July 1, 2024
• Lease renewals with new deposit requirements after July 1, 2024
• Both residential houses and apartments
• Furnished and unfurnished properties alike

Important exception: Landlords who own no more than two residential properties with a combined total of four or fewer rental units can still charge up to two months' rent as a security deposit. This small landlord exemption recognizes that individual property owners often face different financial considerations than large property management companies.

Service Members and Security Deposits

California law provides additional protections for active-duty military personnel. The maximum security deposit for service members remains one month's rent regardless of landlord size, and landlords cannot require last month's rent in addition to the security deposit for military tenants.

What Counts as a Security Deposit

California law defines a security deposit broadly to include any payment, fee, deposit, or charge collected from a tenant at the beginning of or during a tenancy, except for rent payments. This includes:

• Traditional security deposits
• Pet deposits (though not monthly pet rent)
• Key deposits
• Cleaning deposits
• Last month's rent collected in advance

All of these combined cannot exceed the one-month limit under current law. If you collect both a security deposit and last month's rent upfront, the total cannot exceed one month's rent unless you qualify for the small landlord exemption.

Collecting and Holding Security Deposits

California law imposes specific requirements on how landlords collect and maintain security deposits during a tenancy.

Documentation Requirements at Move-In

When collecting a security deposit, provide tenants with written documentation showing the amount collected, the date received, and how the deposit will be held. While California doesn't require deposits to be kept in separate accounts or earn interest (unlike some other states), maintaining clear records protects you in any future dispute.

Conduct and document a thorough move-in inspection before the tenant takes possession. Use a written checklist noting the condition of each room, appliances, flooring, walls, fixtures, and outdoor areas if applicable. Take photographs or video with date stamps. Have the tenant sign the inspection report acknowledging the unit's condition.

This move-in documentation becomes your primary evidence for any deductions at move-out. Without proof of the property's condition at the start of the tenancy, deductions for damages become much harder to defend.

Move-In Inspection Rights

Tenants have the right to be present during move-in inspections. While not legally required, conducting the inspection jointly with the tenant and having them sign the condition report significantly reduces disputes later. Document any pre-existing damage the tenant identifies during this inspection.

Holding Deposits During Tenancy

California landlords can hold security deposits in any account and are not required to pay interest on the deposited funds. Unlike states such as Massachusetts or New Jersey, California has no requirements for separate trust accounts or periodic interest payments to tenants.

However, you cannot use security deposit funds for your personal expenses during the tenancy. The deposit remains the tenant's money held in trust until applied to legitimate deductions or returned at move-out.

Permissible Security Deposit Deductions

California Civil Code Section 1950.5 strictly limits what landlords can deduct from security deposits. Any deduction outside these categories exposes you to penalties.

Four Categories of Lawful Deductions

California law permits security deposit deductions only for:

1. Unpaid rent: Any rent owed at the time the tenant vacates, including partial months if the tenant leaves mid-month without paying the prorated amount.
2. Cleaning: The cost to clean the rental unit to return it to the same level of cleanliness it was in when the tenant moved in. You cannot charge for routine cleaning between tenants if the unit was left reasonably clean.
3. Repair of damages beyond normal wear and tear: Costs to repair damage caused by the tenant, their guests, or their pets that exceeds ordinary wear and tear from normal use.
4. Restoration of tenant alterations: If the lease required the tenant to restore the unit to its original condition after making alterations, you can deduct those restoration costs if the tenant failed to complete them.

Understanding Normal Wear and Tear

The distinction between damage and normal wear and tear causes more security deposit disputes than any other issue. California courts have established guidelines, though each situation requires individual assessment.

Normal wear and tear includes:

• Faded or slightly worn carpet from regular walking
• Small nail holes from hanging pictures
• Minor scuffs on walls from furniture
• Worn finish on door handles and fixtures
• Slight discoloration around light switches
• Natural aging of paint, especially in sunny areas
• Minor marks on hardwood floors from regular use

Tenant damage includes:

• Large holes in walls from anchors or accidents
• Pet stains or odors in carpet or flooring
• Burns on countertops or flooring
• Broken windows, fixtures, or appliances (from misuse)
• Carpet stains from spills that weren't cleaned
• Crayon, marker, or paint on walls beyond touch-up
• Damaged blinds or window coverings
• Unauthorized alterations like removed doors or fixtures

Depreciation and Useful Life Calculations

When deducting for damaged items, you cannot charge the full replacement cost if the item had already been used for part of its useful life. California requires landlords to calculate depreciation based on the item's expected lifespan.

For example, if carpet has a 10-year useful life and was 5 years old when damaged, you can only charge the tenant for 50% of the replacement cost. The tenant isn't responsible for the value that would have depreciated naturally.

Common useful life guidelines used by California courts:

• Carpet: 8-10 years
• Interior paint: 3-5 years
• Window blinds: 5-7 years
• Vinyl or linoleum flooring: 15-20 years
• Appliances: 10-15 years

The 21-Day Return Deadline

California requires landlords to return security deposits within 21 calendar days after the tenant vacates and returns possession. This deadline applies regardless of circumstances and is strictly enforced by courts.

What Must Be Provided Within 21 Days

Within 21 days of the tenant vacating, you must provide:

1. A written itemized statement listing each deduction, the amount deducted, and the reason for each deduction
2. Copies of receipts or invoices for any repair or cleaning work performed, unless the work was done by you or your employees
3. The remaining deposit balance after deductions, if any

If repairs are still in progress at the 21-day deadline, you must provide a good faith estimate with the itemized statement, then provide actual receipts and any additional refund within 14 days after completion of repairs.

Calculating the 21-Day Period

The 21 days begin when the tenant has both physically vacated and returned all keys and access devices. If a tenant leaves belongings behind but returns the keys, the period typically begins on the key return date. If a tenant leaves keys but hasn't removed all belongings, consult with an attorney about when possession is truly returned.

Count calendar days, including weekends and holidays. If day 21 falls on a weekend or holiday, the deadline doesn't extend automatically. Plan to complete your itemized statement and mail the refund well before day 21 to avoid any complications.

Mailing the Itemized Statement

Mail the itemized statement and any refund to the tenant's forwarding address. If the tenant didn't provide a forwarding address, mail it to the rental unit address. The statement is considered delivered when mailed, not when received, so mailing on day 21 satisfies the deadline.

Use first-class mail at minimum. Many landlords use certified mail with return receipt to prove delivery, though this isn't legally required. Keep copies of everything sent for your records.

Penalties for Security Deposit Violations

California imposes significant penalties on landlords who fail to comply with security deposit laws. These penalties make proper compliance essential for every rental property.

Bad Faith Deductions

If a landlord retains any portion of a security deposit in "bad faith," the tenant can recover up to twice the amount wrongfully withheld, plus actual damages. Bad faith includes:

• Deducting for normal wear and tear that isn't damage
• Charging for pre-existing conditions that weren't caused by the tenant
• Failing to provide the required itemized statement
• Deducting amounts that far exceed actual repair costs
• Making false claims about the unit's condition

Failure to Return Within 21 Days

Missing the 21-day deadline can result in forfeiture of the right to make any deductions, leaving you liable for the full deposit amount. Courts take the deadline seriously and rarely accept excuses for delays.

Tenants can also recover attorney fees when they prevail in security deposit disputes, making even modest deposit amounts expensive to litigate.

Improper Itemized Statements

An itemized statement that doesn't meet legal requirements is treated as if no statement was provided. The statement must:

• Specifically describe each deduction (not just "repairs" or "cleaning")
• State the dollar amount for each item
• Include copies of third-party receipts
• Be provided within the 21-day deadline

Move-Out Inspections and Best Practices

Conducting proper move-out inspections protects both landlords and tenants. California law gives tenants specific inspection rights that landlords must honor.

Tenant Right to Pre-Move-Out Inspection

California law requires landlords to offer tenants a pre-move-out inspection within two weeks before the tenancy ends. This inspection must be offered in writing and allows the tenant to be present while you identify potential deductions.

The purpose of this inspection is to give tenants an opportunity to remedy identified deficiencies before final move-out, potentially avoiding deductions. You must provide an itemized statement of any issues identified during the pre-move-out inspection.

If the tenant fixes issues identified in the pre-move-out inspection, you cannot deduct for those same issues at final move-out. However, you can deduct for any new damage that occurs after the pre-move-out inspection or any issues the tenant failed to remedy.

Final Move-Out Inspection

Conduct a thorough final inspection after the tenant has completely vacated and surrendered keys. Compare conditions to your move-in documentation. Photograph or video any damage, wear, or cleaning issues.

Check every area systematically:

• All rooms for wall damage, flooring condition, cleanliness
• Kitchens for appliance function, cabinet condition, countertop damage
• Bathrooms for fixture operation, mold, caulk condition
• Windows and doors for operation and condition
• Outdoor areas for landscaping damage if applicable
• Garage and storage areas
• HVAC filters, smoke detectors, and safety devices

Documentation Best Practices

Maintain a complete file for each tenancy including:

• Signed lease agreement with security deposit terms
• Move-in inspection report with photographs
• Record of deposit amount and date received
• Any correspondence about property condition during tenancy
• Pre-move-out inspection offer and any response
• Pre-move-out inspection itemized statement
• Final inspection report with photographs
• Receipts for all repairs and cleaning
• Copy of itemized statement sent to tenant
• Proof of mailing for deposit return

Special Situations and Common Questions

Several situations create unique security deposit considerations that landlords should understand.

Tenant Abandonment

When a tenant abandons a property without providing notice, the security deposit rules still apply. You must still provide an itemized statement within 21 days of regaining possession and determining that the tenant has abandoned the unit. Send the statement to any known forwarding address or the last known address.

Sale of Rental Property

When selling a rental property with tenants in place, security deposits must be properly transferred. California law requires the selling landlord to either return all deposits to tenants with interest (if applicable) and notify them that the new owner will be responsible for new deposits, or transfer all deposits to the new owner and notify tenants in writing of the transfer amount and new owner's contact information.

The new owner becomes legally responsible for returning deposits once properly transferred, but both old and new owners can be held liable if the transfer isn't handled correctly.

Multiple Tenants and Roommates

When multiple tenants share a lease, the security deposit belongs to all of them jointly. When one roommate leaves while others remain, you are not required to return any portion of the deposit until all tenants have vacated and the tenancy ends.

This can create complications when roommates don't agree on deposit arrangements. Encourage tenants to handle deposit transfers among themselves when roommates change, with appropriate documentation.

Disputes and Small Claims Court

Most security deposit disputes end up in small claims court, where the maximum claim is $12,500 for individuals and $6,250 for businesses (including LLCs). Neither party can have attorney representation in small claims court, making thorough documentation particularly important.

Judges typically favor landlords who can show detailed move-in and move-out documentation with photographs, clear itemized statements with supporting receipts, and evidence that deductions were for damage beyond normal wear and tear.

How Professional Property Management Protects Landlords

Security deposit compliance requires attention to detail at every stage of a tenancy. Professional property managers bring established systems and experience that minimize the risk of costly violations.

At Lifetime Property Management, we handle all security deposit processes for our Sacramento, Placer County, and El Dorado County clients:

• Comprehensive move-in inspections with detailed documentation
• Proper deposit collection within legal limits
• Scheduled pre-move-out inspections as required by law
• Thorough final inspections with photographic evidence
• Accurate itemized statements prepared and delivered within the 21-day deadline
• Appropriate deductions calculated with depreciation when required
• Complete records maintained for each property

Our experience with hundreds of tenant turnovers means we understand what constitutes normal wear and tear versus damage, how to document conditions effectively, and how to process deposits in strict compliance with California law.

For landlords in Roseville, Rocklin, Folsom, Sacramento, El Dorado Hills, and surrounding areas, partnering with a professional property manager eliminates the stress of security deposit compliance while protecting against expensive legal mistakes.