The One-Month Cap Is Now the Baseline
If you own a rental in California, the security deposit question changed on July 1, 2024, and 2026 is the first full year most landlords are renewing leases under the new rules. AB 12 caps the security deposit for most residential rentals at one month's rent, whether the home is furnished or unfurnished. The old framework, two months for unfurnished homes and three for furnished, no longer applies to new tenancies.
Deposits collected before July 1, 2024 under the old limits did not have to be refunded down to the new cap. The cap applies when a new tenancy begins.
The Small-Landlord Exception, and Its Limits
There is one exception worth understanding precisely, because it is narrower than it sounds. A landlord may collect up to two months' rent as a deposit only if both of these are true:
- The landlord is a natural person (or an LLC in which every member is a natural person), and
- The landlord owns no more than two residential rental properties that together include no more than four dwelling units.
Even when a landlord qualifies, the exception never applies to active-duty service members: their deposit is capped at one month's rent regardless of who owns the property.
In practice, many East Contra Costa owners with a single rental do qualify, but ownership through most companies, or a third property, ends the exception. When in doubt, charge one month.
AB 2801: Deductions Now Require Photographs
Since April 1, 2025, deducting from a deposit for repairs or cleaning requires photographic evidence. The current rules:
- Move-out photos: take photographs within a reasonable time after the tenant returns possession, before any repairs or cleaning begin, and again after the work is done.
- Move-in photos: for tenancies that began on or after July 1, 2025, photographs taken at the start of the tenancy are required as the baseline for comparison.
- Share them: the photographs go to the tenant along with the itemized statement of deductions.
- Reasonably necessary: deductions for cleaning are limited to what is reasonably necessary to return the unit to its condition at move-in, ordinary wear and tear excluded. Automatic charges, such as a flat carpet-cleaning fee regardless of condition, do not meet that standard.
For owners, this makes disciplined move-in documentation the single most valuable habit in the deposit process. A deduction without a photo trail is difficult to defend.
The 21-Day Clock Has Not Changed
After the tenant vacates and returns possession, the landlord has 21 calendar days to return the deposit or send an itemized statement of deductions, now accompanied by the AB 2801 photographs and, for deductions above $125, copies of receipts or invoices. Tenants can also request an initial inspection during the final two weeks of the tenancy, which gives them an opportunity to address items before move-out.
What This Looks Like in Practice
At Croskey Real Estate, deposit handling under the 2026 rules is built into the management process: one-month deposits as the default, documented move-in condition reports with date-stamped photographs, a pre-move-out inspection offer for every resident, and itemized statements with the supporting photo record inside the 21-day window. Owners see the documentation; residents see the reasoning. Disputes are rare when both sides are looking at the same photographs.
Quick Reference for 2026
- Maximum deposit: one month's rent for most tenancies
- Small-landlord exception: up to two months, natural persons only, two properties and four units maximum, never for service members
- Photos required: move-in (tenancies from July 1, 2025), before and after any deducted work, shared with the itemized statement
- Refund timeline: 21 calendar days after possession is returned
- Receipts: required with the itemized statement for deductions over $125
This article is general information for California rental owners, not legal advice. For advice about a specific situation, consult a California landlord-tenant attorney.
Croskey Real Estate supports the federal Fair Housing Act and California fair housing law. Equal Housing Opportunity.
Questions about deposit handling for your rental? Schedule a free consultation with our team.
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