If you last rented out your property a few years ago, the deposit you charged then may not be legal today.

That's not a scare tactic. California changed the rule on July 1, 2024, and I still talk with owners who haven't heard. So here's what the law says now, who gets an exception, and what to do when your tenant moves out.

Assembly Bill 12 rewrote California Civil Code section 1950.5. For security collected on or after July 1, 2024, a landlord generally may not demand or receive a security deposit, however it's labeled, of more than one month's rent. That's on top of the first month's rent paid at move-in.

"However it's labeled" matters. A "cleaning deposit," "pet deposit" or "last month's rent" collected up front all count toward the limit.

There's a narrower rule for smaller owners. Under the statute, you may collect up to two months' rent if:

• you're a natural person, or an LLC whose members are all natural persons, and
• you own no more than two residential rental properties, and
• those properties include no more than four dwelling units offered for rent in total.

Even if you qualify, the exception does not apply when the prospective tenant is a service member. In that case, the one-month limit applies.

If you own through a trust, a corporation, or you have more than two rental properties, don't assume the exception fits. Check with your attorney before you set the deposit.

The California Courts self-help guide lists the main things a landlord can generally deduct for:

• unpaid rent;
• cleaning to return the unit to the condition it was in at move-in;
• repairing damage beyond normal wear and tear caused by the tenant or their guests;
• replacing furniture or other items, if they were included in the rental and the damage isn't normal wear and tear.

Normal wear and tear is not deductible. A few small nail holes and carpet that's simply ten years older are different from a broken door or pet damage.

After the tenant moves out, you have 21 days to either return the full deposit or send back the balance with an itemized statement that explains what you deducted and why. If deductions total more than $125, you must attach copies of the invoices or receipts.

This deadline is where owners get hurt. If a court finds a deposit was kept in bad faith, the tenant can be awarded the deposit plus up to twice the deposit amount in damages.

1. Confirm today's limit before you advertise. Check whether you qualify for the small-owner exception, and remember the service-member rule.
2. Add up everything you plan to collect up front besides first month's rent. If it's labeled as security of any kind, it counts.
3. Document the condition of the home at move-in with dated photos and a signed move-in inspection.
4. Keep receipts for any cleaning or repairs during and after the tenancy.
5. Put day 21 on your calendar the day the tenant returns the keys.
6. Use a clear, itemized statement, and attach receipts when deductions exceed $125.
7. When in doubt, talk to a landlord-tenant attorney before you withhold anything.

Rules like this change, and one missed detail can turn a simple move-out into a dispute. If you own a rental on the Central Coast, I'm happy to talk through your setup and what has changed, whether you manage it yourself or want help. Call or text me at (805) 400-5543, email CentralCoastLiz@gmail.com, or reach out through my contact page.

Liz Anderson, Broker/Owner, Central Coast Premier Realty | DRE #01462145

General information, not legal advice. Landlord-tenant law changes often and local rules can add requirements, so confirm your situation with a qualified attorney.

Equal Housing Opportunity.

• California Civil Code §1950.5 as amended by AB 12 (Ch. 733, Stats. 2023)
• Judicial Branch of California, "Guide to security deposits"
• CBS News Sacramento, "California to limit security deposits to 1 month's rent under new law signed by Newsom"