Key takeaways

AB 12 caps residential security deposits at one month's rent, regardless of whether the unit is furnished or unfurnished.

The cap applies to new leases, renewals, and material modifications executed on or after July 1, 2024.

A limited exception allows certain small landlords to collect up to two months' rent, provided the tenant is not a service member.

Landlords must still return deposits and provide itemized deduction statements within 21 calendar days of a tenant vacating.

Starting in 2025, AB 2801 will require landlords to provide photo documentation to justify any deposit deductions.

The Legislation

Effective July 1, 2024, California fundamentally altered the financial mechanics of residential leasing. Authored by Assemblymember Matt Haney, approved by Governor Newsom on October 11, 2023, and chaptered as Chapter 733 of the Statutes of 2023, AB 12 (2023) amended state law to cap residential security deposits at one month's rent. The substantive provisions of the bill revise Civil Code section 1950.5 to establish a uniform maximum deposit across the state, regardless of whether a dwelling is furnished or unfurnished.

Why It Matters

The amendment removes a longstanding financial barrier to housing access by standardizing the maximum allowable security deposit. By restricting landlords to a single month's rent, the legislature forces a shift in risk management. Property owners who previously relied on large cash deposits to hedge against property damage or default must now depend more heavily on front-end tenant screening.

The change also creates immediate compliance obligations for property managers. Because the one-month cap applies to any new lease, renewal, or material modification executed on or after July 1, 2024, landlords must audit their leasing practices. Collecting an excess deposit under a newly signed agreement exposes the property owner to statutory penalties, making strict adherence to the revised statute a baseline requirement for California leasing operations.

Who Should Care

For lawyers

Attorneys representing landlords, property management companies, and real estate investors must update standard lease agreements and operating procedures to reflect the new cap. Counsel should pay close attention to the limited small-landlord exception and advise clients on the specific ownership structures required to qualify. Furthermore, lawyers must prepare clients for the intersection of AB 12 and subsequent legislation. With the passage of AB 2801 (2024), attorneys must guide landlords through new procedural requirements for deposit deductions, ensuring that clients implement photo-documentation protocols before the 2025 effective dates. Failure to align lease renewals with the one-month cap or to document deductions properly will likely generate a high volume of tenant litigation.

For consumers

Prospective tenants seeking residential housing in California now face significantly lower upfront moving costs. Renters negotiating new leases, or signing renewals and material modifications for existing tenancies, are protected by the one-month maximum. Tenants should review their lease documents carefully; if a landlord attempts to charge two or three months' rent for a standard apartment, the tenant has statutory grounds to refuse the excess charge. Service members receive additional protections, as the law guarantees the one-month cap applies to them even if the landlord qualifies for a small-property exception.

Legal Background

Before the enactment of AB 12, California law permitted landlords to collect varying security deposit amounts based on the contents of the rental unit. Under Civil Code section 1950.5 (former subdivision (c), pre-July 1, 2024), a landlord could lawfully demand a security deposit of up to two months' rent for an unfurnished residential dwelling. For a furnished dwelling, the maximum allowable deposit increased to three months' rent. These caps applied in addition to the collection of the first month's rent.

This tiered system allowed landlords offering furnished units to hold substantial cash reserves against potential damages to furniture and appliances. However, it also required tenants to produce up to four months of rent upfront (first month plus a three-month deposit) to secure a furnished home, creating a steep financial hurdle.

What the Legislature Did

Through AB 12, the legislature dismantled the furnished-versus-unfurnished distinction. Under the amended Civil Code section 1950.5, subdivision (c)(1) explicitly bars a landlord from demanding or receiving security in excess of one month's rent.

The legislature did carve out a narrow exception for specific property owners. Under Civil Code section 1950.5(c)(5)(A), a "small landlord" may still collect a deposit of up to two months' rent. To qualify, the landlord must be a natural person, or a limited liability company (LLC) in which all members are natural persons. Additionally, the landlord must own no more than two residential rental properties that collectively contain no more than four dwelling units.

This small-landlord exception contains its own strict limitation regarding military personnel. Under Civil Code section 1950.5(c)(4)–(c)(5)(B), the two-month exception does not apply when the prospective tenant is a service member. For service members, the absolute cap remains one month's rent, regardless of the landlord's portfolio size or corporate structure.

While altering the deposit limits, the legislature left the timeline for returning funds intact. Under Civil Code section 1950.5(h)(1), a landlord must return any remaining deposit and furnish an itemized statement of deductions by personal delivery or first-class mail no later than 21 calendar days after the tenant vacates the premises.

How It May Be Applied

The application of the new cap depends entirely on the timeline of the lease agreement. Existing leases with security deposits collected before July 1, 2024, generally remain valid. Landlords are not required to immediately refund excess deposits for active, unmodified leases that predated the operative date. However, executing a new lease, a lease renewal, or a material modification triggers the application of the AB 12 one-month cap, requiring the landlord to return any previously collected funds that exceed the new one-month limit.

Looking ahead, landlords face additional compliance burdens regarding how they handle the deposits they are allowed to keep. AB 2801 (2024), authored by Assemblymember Friedman and chaptered as Chapter 280 of the Statutes of 2024 (approved September 19, 2024), further amended Civil Code section 1950.5 to introduce strict photo-documentation requirements for deposit deductions.

Beginning April 1, 2025, landlords must photograph the unit after the tenant vacates and again after any repairs or cleaning for which a deduction is claimed. For tenancies beginning on or after July 1, 2025, the requirements expand: landlords must also photograph the unit at the inception of the tenancy. These upcoming rules mean that while landlords can collect less money upfront, they must also produce significantly more evidence to justify withholding any portion of that smaller deposit.

Security Deposit Limits Before and After AB 12

Property/Landlord Type	Pre-July 1, 2024 Maximum	Post-July 1, 2024 Maximum
Unfurnished Unit (Standard Landlord)	2 Months' Rent	1 Month's Rent
Furnished Unit (Standard Landlord)	3 Months' Rent	1 Month's Rent
Small Landlord (Natural Person/LLC, ≤2 properties, ≤4 units)	2 or 3 Months' Rent (based on furnishings)	2 Months' Rent
Any Unit Rented to a Service Member	2 or 3 Months' Rent (based on furnishings)	1 Month's Rent

Plain-English Summary

California has fundamentally changed how much money a renter needs to hand over before moving into an apartment. Starting July 1, 2024, most landlords can only ask for one month's rent as a security deposit, putting an end to the old rules that allowed them to charge double or triple that amount. While a few small-scale landlords who own only one or two properties can still ask for a two-month deposit, they cannot do so if the renter is a military service member. If you are signing a new lease or renewing an old one, the new one-month limit applies to you. Furthermore, landlords will soon have to take photographs before and after you move out if they want to keep any of your deposit to pay for cleaning or repairs.

This article is general legal information and commentary about developments in California law. It is not legal advice, does not address your specific situation, and is not a substitute for advice from a licensed attorney. Reading this article and contacting us through this website do not create an attorney-client relationship.

Sources & authorities

AB 12 (2023) — source
Civil Code section 1950.5 — source
Civil Code section 1950.5 (former subdivision (c), pre-July 1, 2024) — source

California Caps Security Deposits at One Month's Rent Under AB 12

Key takeaways