As of July 2024, California capped most residential security deposits at one month's rent. Here's how the law works in 2026, the narrow small-landlord exemption, and the refund and deduction rules that haven't changed.
By Solaris Property Management — Last updated June 2026
Assembly Bill 12, signed into law in October 2023 and effective July 1, 2024, changed one of the most basic numbers in California rental housing: how much security deposit you can collect. The old rule allowed up to two months' rent for an unfurnished unit and three months' rent for a furnished unit. The new rule is, with limited exception, one month's rent — period, whether the unit is furnished or not.
If your rental started before July 1, 2024, you can keep the deposit you already hold (the law isn't retroactive). But for any new tenancy starting after that date, the one-month cap applies — and the penalties for getting it wrong are real.
A non-refundable cleaning fee is still prohibited under California law, regardless of AB 12. Cleaning charges can only come out of an actual refundable deposit at the end of the tenancy, and only for cleaning beyond ordinary wear and tear.
AB 12 carves out a narrow exemption that allows up to two months' rent. To qualify, all of the following must be true:
The exemption does not apply if the prospective tenant is a service member, as defined under federal law. For service-member tenancies, the one-month cap applies regardless.
If you own a single duplex, you likely qualify. If you own three rental homes, you don't. If your rentals are held in a corporation, REIT, or LLC with any non-individual member, you don't.
For the higher-rent markets we serve — Los Gatos, Saratoga, Capitola, Aptos — the practical effect is that a deposit that used to be $8,000 to $12,000 is now $4,000 to $6,000. That changes the math on a few things:
Solaris collects deposits via Buildium's electronic payments platform on or before lease signing. The deposit is held in a California-compliant trust account, separate from operating funds and separate from rent. We send the tenant a written deposit receipt that lists the exact amount, the date received, and the unit. The receipt and the executed lease both reference the deposit cap that applies to the property.
We always itemize the deposit on the lease — for example, "Security deposit: $4,200 (equal to one month's rent)." Clear documentation makes the refund process at move-out much smoother and protects the owner if the tenant later disputes the amount held.
California's deposit refund rules (Civil Code section 1950.5) were not changed by AB 12, but they're worth restating because the smaller deposit raises the stakes on every step.
You have 21 calendar days from the day the tenant vacates to return the deposit (or whatever portion is owed) along with an itemized statement of deductions.
The statement must list each deduction with a description, the amount, and either receipts/invoices for completed work or good-faith estimates for work not yet done. For any deduction over $125, copies of receipts or invoices must be attached (with limited exception).
Tenants have the right to request an initial inspection within the final two weeks of the tenancy. After that inspection, you must provide a written list of items that, if not corrected before move-out, will result in deductions. This gives the tenant a chance to fix issues themselves — and dramatically reduces disputes later.
Allowable deductions:
Not allowable:
If you make a bad-faith retention of any portion of the deposit, the tenant can recover the wrongfully withheld amount plus up to twice the deposit amount in statutory damages, plus attorney's fees. With a smaller deposit, the damages multiplier still bites — sometimes harder, because tenants are more likely to litigate when their entire $4,000 is at stake.
With a smaller deposit and a 21-day refund deadline, the quality of your move-in documentation is what protects you in any deposit dispute. A few practices we use on every Solaris move-in:
Every room, every floor, every wall, every appliance, every counter. Get close-ups of any existing dings, stains, or chips, with a measuring reference. Use a camera that embeds date and GPS metadata in the file. Store the photos in cloud storage where the original timestamps are preserved.
A written condition checklist, room by room, signed and dated by the tenant at move-in. The tenant should annotate any pre-existing condition they want noted. This is your single best document if a tenant later claims damage existed before they moved in.
The lease should state the deposit amount, what it covers, and that it is held in trust. Spell out the tenant's obligation to return the unit in the same condition, reasonable wear and tear excepted.
Photograph the unit at the same level of detail at move-out, before any cleaning or repair work begins. Keep all invoices for cleaning and repairs, along with before-and-after photos. The 21-day statement is far easier to defend when every dollar is documented.
The deposit cap interacts with the broader regulatory environment. The rent you charge feeds directly into the deposit you can collect, which is bounded by the rent ceiling under AB 1482 for covered units. Voucher tenancies under our Section 8 guide are subject to the same deposit cap as market-rate tenancies. And whatever the deposit, the move-in inspection and screening process are what actually protect the owner — see our tenant screening guide.
For a full picture of how all this fits with our owner services, see the owners page or get in touch.
We'll review your lease, deposit amounts, and refund process to make sure everything is compliant for 2026.
Talk to Solaris →This article is informational and is not legal advice. Consult a California landlord-tenant attorney for advice on your specific property.