California Security Deposit Rules for Landlords (2026)

By Matthew Martinez, Founder, CEO & Managing Broker, Diamond Real Estate Group. California DRE #01869679.

Under Civil Code section 1950.5, most California landlords can collect a security deposit of no more than one month’s rent, on top of the first month’s rent. Within 21 days after the tenant moves out, you must return the deposit or send an itemized statement of deductions with receipts and photos. A few cities, including San Francisco and Berkeley, also require landlords to pay interest on deposits.

The rules changed twice in recent years. AB 12 brought in the one-month cap for deposits collected on or after July 1, 2024. AB 2801 added photo requirements and tighter limits on cleaning charges in 2025. If your lease forms or move-out checklist are older than that, update them before your next turnover.

How much you can collect

The cap counts every payment that works as security, whatever the lease calls it. Section 1950.5 treats as security any payment, fee, deposit or charge that can be used to cover unpaid rent, damage beyond ordinary wear and tear, cleaning at move-out, or the return of personal property. Calling a payment a "pet deposit" or "move-in fee" does not take it out of the cap. The statute also says a lease cannot describe security as "nonrefundable."

The small-landlord test looks at what you own, not just the building being rented. If you own one duplex and one single-family rental, you are at two properties and three units and still qualify. Add a third rental property, or hold your properties through an LLC with a corporate member, and you lose the exception. Our guide to holding rentals in an LLC or in your own name explains why title structure can matter in more ways than this one.

For service members, the statute allows a higher deposit only if it is based on the tenant’s credit or similar factors. The landlord must explain it in writing by the lease signing date, and the extra must come back after no more than six months if the tenant is not behind on rent. That provision took effect April 1, 2025.

What you can deduct

Section 1950.5(b) lists four uses: unpaid rent, repair of damage beyond ordinary wear and tear caused by the tenant or the tenant’s guests, cleaning at the end of the tenancy, and replacing personal property or appurtenances if the lease allows it.

The limits matter as much as the list:

• Ordinary wear and tear and conditions that were there before the tenant moved in cannot be charged. That includes defects that existed at move-in.
• Cleaning is limited. The landlord may charge only to bring the unit back to the same level of cleanliness it had when the tenancy began.
• Professional cleaning may be charged only when it is reasonably necessary.
• Amounts must be reasonable. In a dispute, the landlord has the burden of proving the deductions were reasonable.

A practical example: a tenant who moved into a unit with worn carpet and leaves it worn has not damaged it. A tenant whose pet ruined a section of carpet that was in good condition at move-in probably has. The photo rules below are how you prove the difference.

The photo rules (AB 2801)

These requirements are now part of the statute, and the start dates differ:

• At move-out, starting April 1, 2025: Take photos after the tenant returns possession and before any repairs or cleaning, and again after the work is done (§1950.5(g)(2)).
• At move-in, for tenancies beginning on or after July 1, 2025: Take photos immediately before or at the start of the tenancy (§1950.5(g)(1)).
• With the itemized statement: Deductions for repairs or cleaning must be supported by photos along with receipts or invoices (§1950.5(h)(2)).

Date-stamped photos of each room, appliance and floor surface, kept with the lease file, are the simplest way to comply. For multifamily owners with frequent turnover, a standard photo checklist per unit type saves time.

The pre-move-out inspection

Within a reasonable time after either side gives notice to end the tenancy, or before a lease term ends, the landlord must tell the tenant in writing that they can ask for an initial inspection and be present for it (§1950.5(f)). If the tenant asks, the inspection happens no earlier than two weeks before the tenancy ends, with at least 48 hours’ written notice unless the tenant waives it in writing. You then give the tenant an itemized list of the repairs or cleaning you plan to charge for, so they can fix the items themselves before leaving. In general, you cannot later deduct for items you could have spotted at that inspection but didn’t list, with exceptions for damage after the inspection or items hidden by the tenant’s belongings.

The 21-day deadline and itemization

Within 21 calendar days after the tenant vacates, you must send an itemized statement of deductions and return any balance (§1950.5(h)(1)).

• Receipts or invoices must come with the statement for repairs and cleaning, showing the charges.
• If work isn’t finished within 21 days, you may deduct a good-faith estimate and then send the receipts within 14 days after the work is done.
• Small deductions: If repair and cleaning deductions total $125 or less, the receipt requirement does not apply (§1950.5(h)(4)). Photos and an itemized statement are still good practice.
• Tenant requests: If the tenant asks for documents within 14 days of receiving the statement, you have 14 days to provide them.
• How to return it: Generally by personal delivery or first-class mail check, or electronically if rent was paid electronically, unless the parties agree otherwise. The statement may go by email if both sides agree.

Missing the deadline in bad faith is expensive. A landlord who acts in bad faith on these return rules loses the right to keep any of the deposit (§1950.5(h)(7)). A court can also award statutory damages of up to twice the amount of the deposit, plus actual damages (§1950.5(m)).

When the property sells

If you sell a rental, the deposit has to go somewhere. Under Section 1950.5(i), the selling landlord must, within a reasonable time, either transfer the remaining deposits to the buyer (after any lawful deductions) and notify each tenant with the buyer’s name, address and phone number, or return them to the tenant with an accounting. In escrow this is usually handled as a credit to the buyer, backed by tenant estoppel certificates that confirm each tenant’s deposit. Our guides to buying a property with tenants and selling a rental property cover the rest of that handoff.

Interest on deposits: city rules

State law does not require interest on residential deposits, but some cities do. Two in Diamond’s service area publish clear rules:

In San Francisco, interest is simple, paid on the anniversary of the deposit or credited against rent. If a tenant leaves after the first year, it is prorated and paid within two weeks. Berkeley’s Rent Board says that if interest isn’t paid by January 31, a tenant may deduct 10% of the deposit from a rent payment during the year (Regulation 704). San Francisco updates its annual rate, while Berkeley publishes annual-payment and move-out rates separately. Use the Berkeley Rent Board’s current rate table and calculator for the relevant payment period.

Other cities may have their own rules. Check the city’s housing or rent program page before setting up a lease. Our East Bay rent stabilization by city and Berkeley rent stabilization pages list the local programs we track.

How deposits fit with rent caps and just cause

Deposit rules apply to almost every residential rental, including units exempt from rent caps. If a unit is also covered by the statewide rent cap and just-cause rules, see our AB 1482 guide for landlords and our guide to just-cause eviction. A deposit dispute is rarely worth a tenant relationship or a court date, and clean records usually head one off.

Questions people ask

Can I still charge two months’ rent as a deposit in California?

Only if you meet the small-landlord exception: you are a natural person, or an LLC whose members are all natural persons, and you own no more than two residential rental properties with no more than four units offered for rent. Even then, the exception does not apply when the tenant is a service member.

Do I have to refund deposits I collected before July 1, 2024 that were over one month’s rent?

No. The statute says the one-month cap does not apply to security collected before July 1, 2024. The return, itemization and photo rules still apply when that tenancy ends.

Does a pet deposit count toward the cap?

Yes. Any payment that can be used for the purposes listed in Section 1950.5(b), whatever it is called, counts as security.

What if repairs take longer than 21 days?

You can deduct a good-faith estimate within the 21 days, then send the receipts or invoices within 14 days after the work is completed.

Do I need photos if I’m only deducting for cleaning?

Yes. Deductions for repairs or cleaning must be supported by photos. Receipts are not required when repair and cleaning deductions total $125 or less, but photos are still your best evidence.

Can I keep the deposit for unpaid rent?

Yes. Unpaid rent is one of the four permitted uses. List it on the itemized statement like any other deduction.

Do I owe interest on deposits?

Not under state law. San Francisco and Berkeley require it for covered units, and other cities may too. Check the city’s rent program before each lease year.

What happens if I miss the 21-day deadline?

If a court finds you acted in bad faith, you can lose the right to keep any of the deposit and may owe up to twice the deposit in statutory damages, plus actual damages.

Sources & notes

1. California Civil Code §1950.5: deposit cap, small-landlord exception, permitted uses, photos, pre-move-out inspection, 21-day return, $125 threshold, damages. Text read on the California Public Law mirror because leginfo did not load during review; the official leginfo text controls.
2. AB 12 (2023) and AB 2801 (2024): the bills that added the cap and the photo and cleaning rules. Operative dates above are from the current statute text.
3. San Francisco Rent Board: Security deposits: who must pay interest, timing, Administrative Code Chapter 49.
4. San Francisco Rent Board: Interest rate effective 3/1/26: 4.2% for March 1, 2026 to February 28, 2027.
5. Berkeley Rent Stabilization Board: 2025 security deposit interest: 0.9% for 2025; Regulation 704 penalty.

General information, not legal, tax or lending advice. Updated November 2026. Primary sources are linked in this guide.

Related: AB 1482 for landlords · Just-cause eviction · Property management in California · Investor services