Security deposits are one of the most common sources of disputes between landlords and tenants in California. Mismanaging them can lead to lawsuits, penalties, and strained tenant relationships. Understanding the laws around collecting, holding, and returning security deposits is essential for protecting your investment and maintaining compliance.
California Security Deposit Limits
Keywords: California security deposit laws, landlord tenant rights, rental property management Orange County
Previously, landlords could collect up to two months’ rent for unfurnished units and three months’ rent for furnished units. However, under Assembly Bill 12 (AB 12), which took effect on July 1, 2024, new limits now apply (California Apartment Association, SF.gov):
General Rule: Landlords may now collect no more than one month’s rent as a security deposit, regardless of whether the unit is furnished or unfurnished.
Small Landlord Exception: Natural persons or LLCs made up entirely of natural persons who own no more than two properties (with a combined maximum of four units) may still collect up to two months’ rent.
Service Members: Even for small landlords, the limit is capped at one month’s rent if the tenant is a service member.
This change represents a major shift in California rental law, designed to make housing more accessible by reducing upfront move-in costs.
Permissible Uses of a Security Deposit
A landlord may use part of a tenant’s deposit to cover:
Unpaid rent
Repairing damage beyond normal wear and tear
Cleaning costs to return the unit to its original condition
Restoration of personal property provided by the landlord (e.g., furniture)
Repairing any damage incurred from pets even if they are service animals or ESAs
Returning a Security Deposit
Timeline: Landlords must return the security deposit within 21 calendar days after the tenant vacates.
Itemized Statement: If deductions are made, landlords must provide an itemized statement with receipts or invoices for repairs and cleaning costs.
Unreturned Deposits: Failure to return deposits properly may subject landlords to damages of up to twice the amount withheld in bad faith cases.
Common Landlord Mistakes
Charging tenants for normal wear and tear (illegal)
Failing to provide receipts for deductions
Missing the 21-day deadline
Withholding deposits as a penalty instead of for legitimate expenses
Best Practices for Landlords
Conduct thorough move-in and move-out inspections with photos or videos
Provide tenants with a pre-move-out checklist
Use a trust account to hold deposits separate from rental income
Always document and provide receipts for deductions
Final Thoughts
Security deposit disputes are one of the leading causes of landlord-tenant conflict in California. With the new 2024 limits under AB 12, compliance is more important than ever. By documenting thoroughly and returning deposits on time, landlords can avoid costly legal disputes and build stronger tenant relationships.
At PMI South OC, we take the stress out of deposit management. Our detailed inspection reports, tenant communication systems, and compliance expertise ensure deposits are handled legally and fairly every time.
Call us today to learn more about our proven property management process—from tenant screening to compliance and maintenance—and see how we can protect your investment. Request a free rental analysis to see how much your property could earn in today’s market.
