AB 12 changed what many California residential owners can collect as security. The operating question is what happens next: how the amount is approved, how the unit's condition is recorded, and how repairs are funded when the resident's deposit cannot be treated as owner cash.
California Civil Code section 1950.5 generally limits residential security to one month's rent in addition to the first month. The limit applies to what a landlord demands or receives, even when the charge has a different name.
A landlord who is a natural person, or an LLC with only natural-person members, may demand up to two months only if that landlord owns no more than two residential rental properties with no more than four units offered for rent. This exception does not apply to a prospective service member. The statute defines how a family trust fits the natural-person requirement.
The new cap does not apply to security collected or demanded before July 1, 2024. Check the owner, entity, properties, units, applicant and collection date against the current statute before approving the amount. Small landlord is a description, not proof of eligibility.
The statute treats security by its use, even when a charge has a different label. Relabeling an amount as a cleaning, key or pet deposit does not make it a new allowance. Record the rent, proposed security, charge description, approval and receipt in the same tenancy file.
For tenancies beginning on or after July 1, 2025, the statute requires photographs immediately before or at the start of the tenancy. Beginning April 1, 2025, it also requires photographs before and after repairs or cleaning that will be deducted from security. Preserve the opening record, the move-out condition and the completed work.
A dated condition record, resident communication and invoices help explain whether work addresses damage beyond ordinary wear or an owner maintenance item. The inspection and accounting provisions govern the resident's initial-inspection option and the itemized disposition. The statement and remaining security generally must be provided within 21 calendar days after the resident vacates. Required supporting documents and any allowed good-faith estimate follow the statute's conditions.
As a hypothetical example, a cabinet door was already chipped at move-in. An undated invoice after move-out cannot by itself turn that old condition into a resident charge. If the opening record shows an intact door and later damage, document the changed condition, proposed repair and reasonable cost. Ordinary wear remains excluded.
Security is held for the resident and may be claimed only for purposes the statute permits. It is not a standing reserve for ordinary wear, upgrades or vacancy. Estimate those owner costs from the property's turnover history, condition and current quotes. Keep expected deposit recovery out of available cash until the facts and accounting support it. Our separate turnover budget guide develops the owner-funding question in more detail.
Review a screening process, insurance policy or software purchase on its own cost, lawful scope and property need. Ask what risk it addresses, what it excludes and who will use it. A change in the deposit cap does not establish that a product is necessary or that it pays for itself.
If your team needs help organizing deposit records across a rental portfolio, contact Coastline Equity with the properties and the operating decision you need to make.