TL;DR — 30-second answer
California security deposits are capped at one month's rent as of July 1, 2024 (AB 12). Exception: a landlord who personally owns ≤2 properties / ≤4 total rental units can charge up to two months' rent — but never to a service member tenant.
What AB 12 actually did
AB 12 was signed October 11, 2023 and took effect July 1, 2024. It amended Civil Code §1950.5 to cap residential security deposits at one month's rent. The prior framework allowed two months on unfurnished, three months on furnished. AB 12 collapsed both into a single one-month ceiling, with one narrow exception for small landlords.
It's the largest single change to California security deposit law in decades. Applies to virtually every residential rental — single-family, condo, apartment, duplex — and runs through the existing §1950.5 private right of action.
The small-landlord exception (the 2/4 rule)
AB 12 carved out one exception that lets qualifying small landlords still collect up to two months. All four conditions have to be true:
- Natural person, not entity. The landlord must be a natural human person, not an LLC, corporation, partnership, or REIT.
- ≤2 residential rental properties. The landlord must own no more than two residential rental properties total — anywhere, not just in California.
- ≤4 total rental units. Across those two properties combined, the total number of rental units must not exceed four.
- Tenant is not a service member. Even if conditions 1–3 are met, the landlord cannot charge more than one month's rent to a service member (active military) tenant. The service member always gets the one-month cap regardless of landlord size.
Common mistakes
A husband-wife LLC does not qualify (entity, not natural person). Owning 3 properties, even with only 2 units in use as rentals, disqualifies you. A 5-unit building disqualifies you regardless of property count. When in doubt, charge one month — the small-landlord exception is narrow.
What "one month's rent" actually means
The cap reads against the monthly rent stated in the lease — not market rent, not effective rent after concessions. Rent at $3,000/month? Deposit max is $3,000 (or $6,000 with the small-landlord exception). Furnished/unfurnished distinction is gone.
Pet deposits, last month's rent, application fees — all of these aggregate against the §1950.5(b) cap. The AB 12 ceiling is the security deposit total under §1950.5, regardless of what individual line items get called.
How AB 12 handles existing leases
| Scenario | What AB 12 requires |
|---|
| Lease signed before July 1, 2024 (deposit collected at higher amount) | No refund required. Existing deposit can be held under the prior contract terms. |
| Lease renewal on or after July 1, 2024 | Any new deposit collection must comply with the one-month cap. Cannot collect "supplemental" deposit above one month. |
| New lease signed July 1, 2024 or later | One month's rent maximum (or two months under the small-landlord exception). |
| Tenant moves out, you re-rent the unit | New deposit collected from new tenant must comply with AB 12. |
| Tenant requests refund of "excess" old deposit | Not legally required to refund deposits that were lawful when collected. But check for goodwill if the over-cap amount is significant. |
Move-out itemization rules didn't change
AB 12 didn't touch the §1950.5 framework for what's deductible, the 21-day return deadline, or the itemization requirements. All of that still applies the same way. See our full §1950.5 rules for the move-out playbook.
Allowable deductions: unpaid rent, repairs for damage beyond ordinary wear and tear, cleaning to return the unit to the condition at move-in, restoration of personal property if specified in the lease. Itemized statement plus copies of receipts must be delivered within 21 days of tenant move-out.
What overcharging actually costs
The §1950.5 enforcement framework applies the same way it does to any deposit violation. A tenant whose landlord collected over the AB 12 cap can:
- Demand return of the excess amount
- Sue in small claims for the excess plus statutory damages up to twice the amount of the unlawful deposit if retention was in bad faith (§1950.5(l))
- Recover attorney's fees in some cases
The exposure is meaningful. On a $3,500/mo rental, charging two months' deposit (instead of one) creates $3,500 of excess plus potential $7,000 in statutory damages — for a total exposure of $10,500 per unit before legal fees. Don't try to thread the needle on this one.
Best practice
Default to one month's rent. Use the small-landlord exception only if you've confirmed in writing that all four conditions are met, that you're documenting compliance per §1950.5, and that no service member tenants are in the unit.
What this means for OC landlords specifically
AB 12 hits coastal OC markets hardest. A high-end coastal SFR that previously carried two or three months of deposit now caps at one month, which on a $4,000–$6,000 rent is a meaningful change in cushion against tenant-caused damage that exceeds the cap. That's exactly why the screening side of the operation matters more under AB 12 than it did before.
Practical adjustments owners actually made:
- Price tenant risk into the rent, not the deposit. Higher rent on higher-risk applicants is legal; demanding 3 months' deposit is not.
- Tighten screening criteria. The deposit cap shifts loss risk back to the landlord, so income verification, prior-eviction checks, and landlord references matter more than ever.
- Consider a co-signer for higher-risk applicants instead of trying to demand a larger deposit.
- Structure pet rent (not pet deposit) — pet rent is monthly recurring income; pet deposit counts toward the AB 12 cap.
Common questions
What's the maximum California security deposit in 2026?
One month's rent. The only path to two is the small-landlord exception: natural person, two properties or fewer, four units or fewer total. Service member tenants are always at one month regardless.
Does my LLC qualify for the small-landlord exception?
No. The exception is for natural persons only. Husband-wife LLCs don't qualify. Family trusts don't qualify. If you took the LLC route for liability protection, you're at one month per unit regardless of portfolio size.
Does AB 12 force refunds on older leases?
No. Deposits collected under leases signed before July 1, 2024 don't get refunded down to one month. The cap applies to new deposits at lease renewal or with new tenants going forward.
I collected over the cap after July 1, 2024. Now what?
Refund the excess now. Document the corrected ledger. The tenant can still sue for the unlawful amount plus up to 2× the deposit as a §1950.5(l) penalty if retention was in bad faith — but a documented voluntary refund is a strong mitigation.
Are pet deposits inside the AB 12 cap?
Yes. Any refundable amount counts. Pet rent is different — monthly pet rent is rent, not a deposit, and doesn't aggregate toward the §1950.5 cap.
CA Landlord Laws