California security deposit law and the records to keep

Why the records matter as much as the rules

California’s deposit rules sit in Civil Code section 1950.5. Three of them shape most move-outs: how much you can collect, which photos you take, and what you send within 21 days. If a tenant goes to court, the landlord has to prove the deductions were reasonable.

Keeping a deposit in bad faith can lead to a penalty the law calls statutory damages: up to twice the deposit, on top of actual damages. Fail in bad faith to follow the move-out rules (the statement, the refund, the receipts and photos), and you can’t claim any of the deposit. This isn’t legal advice, and some cities add their own deposit rules, so check yours too.

Reference: California Legislative Information: Civil Code section 1950.5 (opens in a new tab)

How much deposit can you collect?

Since July 1, 2024, the limit is one month’s rent, on top of the first month’s rent. The change came from AB 12 and doesn’t apply to deposits collected or demanded before that date. A tenant on a lease of six months or more can still pay six months’ rent or more in advance.

Some small landlords can still take two months’ rent. The landlord must be a person (including through a family trust among close relatives) or a limited liability company owned only by people. They must also own no more than two residential rental properties, with four or fewer units offered for rent. This exception never applies to a service member, and you can’t refuse to rent to one because of it.

Since April 1, 2025, a service member charged more than your standard or advertised deposit (still within the cap) must get a written statement by lease signing. It gives the amount and the reason, such as credit, housing history or another factor about them. The extra goes back after no more than six months if rent is paid up, on a date written into the lease. No lease can call a deposit “nonrefundable.”

If you manage for several owners, the cap turns on everything each owner holds, not only the units you manage. Ask each owner, and record who qualifies for two months.

References: California Legislative Information: Civil Code section 1950.5 (opens in a new tab) · California Legislative Information: AB 12 (2023), Tenancy: security deposits (opens in a new tab)

Which photos do you have to take?

AB 2801 added photo rules with two start dates. Since April 1, 2025, photograph the unit within a reasonable time after you get it back, before any repair or cleaning you’ll deduct for, and again within a reasonable time after that work. Since July 1, 2025, new tenancies also need photos immediately before or at move-in. A tenant who moved in earlier still needs move-out photos.

If you deduct for repairs or cleaning, send the photos and a written explanation of the cost with the itemized statement, unless the $125 or waiver exception below applies. Photos can go by mail, email, flash drive or an online link; the statement itself has stricter delivery rules. Use one checklist per unit so every set is comparable.

References: California Legislative Information: Civil Code section 1950.5 (opens in a new tab) · California Legislative Information: AB 2801 (2024), Tenancy: security deposits (opens in a new tab)

What you can deduct, and what you can’t

You can’t charge for damage that was there before the tenancy or for ordinary wear and tear. Professional carpet cleaning or other professional cleaning is out too, unless it’s reasonably necessary to get the unit back to its move-in condition. Repairs are limited to a reasonable cost to restore that condition.

That is why move-in photos matter: they record what “move-in condition” was. For tenancies that began before July 2025, find whatever move-in checklist or notes you kept. Within those limits, you can only take what’s reasonably necessary for:

• Unpaid rent.
• Damage beyond ordinary wear and tear, caused by the tenant or their guest.
• Cleaning back to how clean the unit was at move-in.
• Restoring, replacing or returning personal property, or things that come with the unit, beyond ordinary wear and tear, if the lease allows it.

References: California Legislative Information: Civil Code section 1950.5 (opens in a new tab) · California Legislative Information: AB 2801 (2024), Tenancy: security deposits (opens in a new tab)

What do you owe the tenant before move-out?

Within a reasonable time after either side gives notice to end the tenancy, or before the lease ends, tell the tenant in writing they can ask for an initial inspection and attend. Include the law’s short statement about reclaiming belongings left behind. The inspection happens no earlier than two weeks before the end date, with at least 48 hours’ written notice unless you both sign a waiver.

Afterward, give them an itemized list of the repairs or cleaning you plan to deduct for, with the text of section 1950.5(b)(1)–(4), the four allowed deductions. Hand it to them if they’re there, or leave it inside the unit. Unless their belongings hid a problem, you can’t later deduct for anything not on the list, apart from damage after the inspection. These inspection rules don’t apply in some eviction cases.

If the deposit or any rent came in electronically, send a second written notice in the same window: the tenant can get the deposit back electronically, to an account they name in writing. You can skip it if you already agreed in writing on another return method, or in some eviction cases.

References: California Legislative Information: Civil Code section 1950.5 (opens in a new tab) · California Legislative Information: AB 414 (2025), Residential tenancies: return of security (opens in a new tab)

The 21-day statement and the receipts behind it

No later than 21 calendar days after the tenant moves out, send an itemized statement of the deposit and what you did with it, and return the rest. Hand the statement over or send it by first-class mail; email works only if you both agreed to it.

Since January 1, 2026, if the deposit or rent came in electronically, the refund generally goes back electronically, to the account the tenant named, unless you agreed in writing on another method. With several adult tenants and no written agreement, it’s one check to all of them, unless a tenant who ended the lease early under Civil Code section 1946.7 asks for another method.

If a repair by you or your staff can’t reasonably be finished in 21 days, or a contractor’s or supplier’s paperwork hasn’t arrived, deduct a good-faith estimate. If you’re waiting on paperwork, include that vendor’s name, address and phone number. Within 14 calendar days of finishing the work or getting the paperwork, send the final statement and copies, and any money still owed.

The receipts and photos below aren’t required up front if repairs and cleaning total $125 or less. Nor are they if the tenant signed a waiver at or after the notice to end the tenancy, or within 60 days before a fixed-term lease ends. The tenant can still ask for them within 14 days of the statement, and you then have 14 days to send them. Otherwise, include:

• Work by you or your staff: what was done, the time spent and the reasonable hourly rate.
• Work by a contractor: a copy of their bill, invoice or receipt, plus their name, address and phone number if it doesn’t show them.
• Materials or supplies: a copy of the bill, invoice or receipt, or a vendor price list for items you buy all the time.
• Repairs or cleaning: the photos, with a written explanation of the cost.

References: California Legislative Information: Civil Code section 1950.5 (opens in a new tab) · California Legislative Information: AB 414 (2025), Residential tenancies: return of security (opens in a new tab)

Keeping every unit’s deposit records in one place

Every rule above turns on dates and documents. Spread across a phone, an inbox and a spreadsheet, day 19 turns into a search. For example, a manager with 40 units across six owners might have a few move-outs a month, each with its own clock.

Some managers use a property management app like AppFolio. If it keeps these records the way you work, keep it; our comparison of custom and off-the-shelf software walks through that choice. If not, we can build a system that keeps deposit records in one place, connected to QuickBooks Online if you use it. If your rent app isn’t one we usually connect to, we check it can connect before we quote.

Either way, the records should include:

• A deposit ledger per tenancy: amount, date received, how it was paid, the owner’s cap, and the account the tenant named for the refund.
• Dated photos per unit, labeled move-in, move-out or after repair.
• Each deduction on its own line, with its receipt, invoice or hours and photos.
• The date each notice went out: the inspection offer and any electronic-refund notice.
• A 21-day countdown from the move-out date, plus the 14-day follow-ups.
• A summary of each tenancy’s deposit and deductions for when an owner sells: deposits then move to the buyer, with notice to each tenant, or go back to the tenants with a statement.

Reference: California Legislative Information: Civil Code section 1950.5 (opens in a new tab)

What to write down before you talk to anyone

This isn’t legal advice, so have a lawyer check your process against the current text of section 1950.5. If you’re weighing software for these records, our first call is free, and you get a fixed price in writing within 48 hours of it. A focused fix, like one new form or report, is typically $750–$3,000 over 1–⁠2 weeks. One business system is $6,000–$18,000 over 6–⁠10 weeks; what custom software costs explains what moves the number.

Whoever you talk to, bring a page of notes. Write down:

• How many units and owners you manage, and which owners might qualify for two months.
• Where deposit records and photos live today, and how you track notices and the 21 days.
• How tenants pay, and every app you use, like AppFolio or QuickBooks Online, with its monthly cost.