Effective July 1, 2024, California changed the rules for security deposits in a big way. If you own residential rental properties in Cypress, CA, you need to know how this new law works.
The AB12 California Security Deposit Law change is simple: most residential landlords can now only collect one month’s rent as a maximum security deposit. No more two months’ rent for unfurnished units or three months’ rent for furnished properties.
This shift makes moving in cheaper for tenants but means property owners hold less money if there’s unpaid rent or damage. Because AB12 caps deposits at one month’s rent, many renters are paying far less upfront compared to the old two- or three-month deposit standard. Suitable for tenants, but you need financial protection and proper procedures.
Key Takeaways
- AB12 caps security deposits at one month’s rent for most California rental properties, including furnished units and pet deposits, reducing upfront costs for tenants compared to previous two- or three-month standards.
- Small landlords exception meeting strict rules and criteria—natural persons or limited liability corporations of natural persons with no more than two properties totaling four units—can still collect up to two months’ rent, but service members are always limited to one month’s rent.
- Proper documentation is critical under AB12, as landlords who maintain move-in checklists, photos, repair invoices, and itemized statements are far less likely to lose disputes in civil or small claims court.
A. The Law Limiting Security Deposits
AB12 changed California Civil Code Section 1950.5 and put a hard cap on security deposits for almost every rental. Landlords can now only collect one month’s rent, whether the place is furnished or not, and pet deposits count toward that amount. The law also tightened the rules for inspections and how quickly deposits must be returned.
Exceptions for Certain Landlords and Tenants
Not every landlord has to stick to the one-month cap. AB12 California Security Deposit Law leaves room for small landlords, but the rules are tight:
- Who qualifies: You have to be a natural person, meaning a regular individual, or an LLC made up entirely of natural persons. Big corporations, trusts, and partnerships don’t make the cut.
- Property limits: You can own no more than two rental properties with four or fewer units total. Own more, and you follow the one-month rule like everyone else.
- How much you can collect: If you qualify, you can still ask for up to two months’ rent as a deposit.
- Service members: No matter what, service members can only be charged one month’s rent for a deposit.
This carve-out gives California landlords some breathing room, but keep proof you qualify. Misclassifying yourself could lead to disputes or penalties in civil court.
B. How AB12 Affects Property Owners
With less money in deposit funds, you need to be sharper about screening. Many property owners are revising their application processes. They’re defining their screening criteria more clearly, requiring more documentation and tenant criminal background checks, and making sure they follow new procedures for fees and first-come processing.
It also means the landlord’s personal funds are more at stake if a tenant leaves damage behind. Careful lease agreements, good communication, and strong move-in checklists are now part of basic tenant protections.
C. Lease Agreements and Inspections
Check your rental agreements today. They should reflect the new security deposit limits and spell out rules clearly.
California law says you must offer an initial inspection when a tenant moves out or gives notice. Give written notice, do the walkthrough, and document everything. This lets tenants fix problems before move-out and cuts down on security deposit disputes later.
D. Returning Security Deposits the Right Way
Once a tenant vacates, the 21-day clock starts. You must return the entire security deposit or send an itemized statement explaining deductions within those 21 days.
Allowable deductions include:
- Rent owed or other unpaid charges
- Cleaning costs beyond normal wear
- Repairs for damage by the tenant or the tenant’s guests
- Missing personal property that came with the unit
Failure to follow these timelines or provide proper security deposit receipts can lead to disputes, where tenants may take the case to small claims court or civil court.
E. Handling Security Deposit Disputes
Disputes happen, even when you plan carefully. A lot of landlord-tenant disputes come down to missing or incomplete records. That’s why proper documentation is crucial.
Take detailed move-in condition reports, snap photos of pre-existing conditions, keep repair invoices, and provide a clear itemized statement. These steps help keep tenants informed and protect you if a disagreement ends up in civil court. California law now makes it clear that landlords need this kind of evidence when making deductions from security deposits, so staying organized isn’t optional anymore.
Steps to Protect Your Rental and Stay Compliant
AB12 California Security Deposit Law changed the rules for Cypress landlords, so it’s smart to get ahead. Here’s what to do:
1. Update your leases
Make sure your leases match the new security deposit limits. Spell out pet policies and deposits, move-in rules, and allowable deductions. Clear rules keep tenants on the same page and cut down on confusion or arguments.
2. Tighten inspections and documentation
Keep a close eye on your rental unit’s condition. Use move-in checklists, take photos, and note any pre-existing issues. Offer initial inspections when tenants give notice and document move-out carefully. Good records protect you if a security deposit dispute ends up in civil court.
3. Plan for smaller deposits
With reduced security deposits, set aside reserves for rent owed or damage beyond normal wear, so you don’t rely solely on deposit funds.
4. Get help from property managers
Property managers can assist landlords by handling inspections, security deposit returns, and keeping their paperwork straight. They make compliance easier, save time, and take stress out of the process, especially in a tight rental market like Cypress, CA.
Manage Your Rental Business with Confidence with PMI Patron
Staying on top of California’s security deposit laws takes time and attention. From initial inspections to handling tenant disputes, there’s a lot to track, and mistakes can cost you. That’s where a professional property management team comes in. They can simplify compliance, reduce stress, and help you run your rental business smoothly under the AB12 California Security Deposit Law.
PMI Patron in Cypress, CA, offers hands-on support for landlords who want to stay ahead of the changes. Their services include:
- Move-in and move-out initial inspections to document your rental units
- Detailed security deposit returns with proper tax reporting
- Managing landlord-tenant disputes before they escalate to civil court
- Staying current with California security deposit laws so you remain compliant
Don’t wait for a dispute or compliance issue to disrupt your rental business. Check out our Owner Resources page today to get the tools, guidance, and expert support you need and take control of your rental properties with confidence!
FAQs
Can I still charge a pet deposit under AB12?
Under AB12, any pet deposit is included within the overall one-month rent cap for security deposits. Landlords cannot collect additional funds specifically for pets beyond this limit.
Does AB12 apply to existing tenants or only new leases?
AB12 applies only to new security deposits obtained after July 1, 2024. Security deposits collected before this date, provided they were lawfully obtained, can remain unchanged.
What deductions can I legally make from a tenant's security deposit?
You can deduct for cleaning the rental unit to restore it to the same level of cleanliness as when the tenant first moved in, repairing damage caused by the tenant (excluding normal wear and tear), and restoring or replacing furniture or personal items if specified in the rental agreement and the damage isn't from normal wear and tear.
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