California’s New Security Deposit Law (AB 12): What Tenants and Landlords Need to Know in 2025

Introduction: A Game-Changer for California’s Rental Market

Renting in California just got a major shake-up! As of July 1, 2024, Assembly Bill 12 (AB 12) has slashed the maximum security deposit landlords can charge to one month’s rent for most residential rentals, whether furnished or unfurnished. This is a big shift from the old rules, which allowed up to two months’ rent for unfurnished units and three for furnished ones. Signed by Governor Gavin Newsom in October 2023, AB 12 aims to make renting more affordable while still balancing landlord protections. Whether you’re a tenant saving up for a new place or a landlord managing properties, this law changes the game. Let’s dive into what AB 12 means for both sides, with practical insights and tips to navigate this new landscape. [Sources: ]

What Is AB 12? The New Security Deposit Law Explained

Before AB 12, California landlords could charge hefty security deposits—up to two months’ rent for unfurnished units and three months’ rent for furnished ones—on top of the first month’s rent. In high-rent areas like San Francisco (median rent: $3,495) or San Jose ($3,170), this meant thousands of dollars upfront, creating a huge barrier for renters. AB 12, effective July 1, 2024, changes this by: [source: ]

• Capping security deposits at one month’s rent for most residential rentals, furnished or unfurnished. [source: ]
• Including all deposits (e.g., pet deposits, key deposits, or cleaning fees) in this one-month cap, eliminating separate charges for things like “last month’s rent.” [sources: ]
• Allowing small landlords (those owning no more than two properties with a total of four or fewer units) to charge up to two months’ rent, unless the tenant is an active service member, who are capped at one month’s rent. [source: ]
• Applying only to new leases signed on or after July 1, 2024—existing leases with higher deposits remain unaffected until renewal. [source: ]

This law, amending California Civil Code Section 1950.5, is part of California’s push to ease the housing crisis by reducing upfront costs for tenants. It aligns the state with 11 others that cap deposits at one month’s rent, making renting more accessible in a competitive market. [source: ]

What AB 12 Means for Tenants: A Win for Affordability

For California renters, AB 12 is a breath of fresh air. Here’s how it benefits you:

1. Lower Upfront Costs

With security deposits now capped at one month’s rent, moving into a new place is much less daunting. For example, if you’re eyeing a $2,500/month apartment, you’ll need just $2,500 for the deposit (plus first month’s rent) instead of up to $5,000 under the old rules. This is a game-changer for young professionals, students, or families struggling to save in California’s pricey rental market. [source: ]

2. No More “Pet Deposit” Loopholes

Got a furry friend? Previously, landlords could tack on extra pet deposits, pushing the total beyond the legal limit. Now, pet deposits are included in the one-month cap, so your landlord can’t charge extra for Fluffy’s stay. However, landlords can still charge monthly “pet rent” (e.g., $50/month), so read your lease carefully

3. Protection for Service Members

If you’re an active service member (e.g., National Guard or Armed Forces on active duty), you’re guaranteed the one-month cap, even if your landlord qualifies for the small landlord exception. This ensures military renters aren’t hit with higher deposits. [source: ]

4. Greater Accessibility

Lower deposits mean more people can afford to rent, especially in high-cost areas like the Bay Area or Los Angeles. This opens doors for renters with limited savings, making California’s housing market a bit more inclusive. [source: ]

What AB 12 Means for Landlords: Challenges and Opportunities

For landlords, AB 12 requires some adjustments, especially for those used to larger deposits as a financial cushion. Here’s the impact:

1. Reduced Financial Protection

With deposits capped at one month’s rent, landlords have less to cover potential damages, unpaid rent, or cleaning costs (beyond normal wear and tear). This is especially tough for larger property owners who don’t qualify for the small landlord exception. For example, if a tenant damages a $3,000/month unit, the deposit may not cover repairs, forcing landlords to pursue damages separately. [source: ]

2. Small Landlord Exception

If you’re a “small landlord” (a natural person or LLC/family trust with all natural person members, owning no more than two properties with four or fewer units), you can charge up to two months’ rent—unless the tenant is a service member. This offers some relief, but you’ll need to verify your eligibility and document it clearly to avoid legal challenges. [source: ]

3. Stricter Tenant Screening

With less deposit protection, landlords may tighten tenant screening to minimize risks. Expect more emphasis on credit checks, employment verification, and references to ensure tenants are reliable. Some may also turn to renter’s insurance to cover potential damages.

4. Compliance Is Critical

Charging more than the legal limit (one month for most, two for qualifying small landlords) can lead to legal action, including refunds of excess deposits, attorney fees, and statutory damages. Landlords must update lease agreements and rental applications to reflect AB 12’s rules. [source: ]

The Bigger Picture: Balancing Tenant and Landlord Needs

AB 12 is part of California’s broader push to address the housing crisis, where soaring rents (e.g., $3,495/month in San Francisco) make affordability a challenge. By lowering security deposits, the state aims to reduce barriers for renters, especially low-income or first-time tenants. However, landlords face increased risks, which may lead to higher rents or stricter screening to offset losses. [sources: ]

Interestingly, AB 12 has unintended consequences. Some landlords have eliminated “conditional approval” programs that allowed higher deposits for tenants with marginal credit, potentially making it harder for these renters to secure housing. On the flip side, larger property owners are offering lower deposits to fill vacancies faster, gaining a competitive edge in hot markets. [sources: ]

Related Changes: AB 2801 and Security Deposit Documentation

While AB 12 focuses on deposit limits, Assembly Bill 2801 (effective April 1, 2025, with full implementation by July 1, 2025) adds transparency to deposit deductions. Landlords must now:

• Take photos or videos of the unit after move-out (before repairs) and after repairs/cleaning to justify deductions.
• For new leases starting July 1, 2025, document the unit’s condition before move-in.
• Provide tenants with these photos and an itemized statement within 21 days of move-out.
• Avoid automatic cleaning fees (e.g., carpet cleaning) unless necessary to restore the unit beyond normal wear and tear. [sources: ]

This complements AB 12 by ensuring tenants aren’t unfairly charged, while landlords must be diligent about documentation to avoid disputes.

Conclusion: Navigating the New Normal

California’s AB 12 is a bold step toward making renting more affordable, but it’s a balancing act. Tenants gain lower upfront costs and protection from excessive deposits, while landlords must adapt with tighter screening, updated leases, and robust documentation. By understanding and complying with AB 12 (and preparing for AB 2801), both parties can thrive in California’s dynamic rental market.

For Tenants: Celebrate the savings, but stay proactive—document your unit’s condition and know your rights to ensure a fair deposit return.
For Landlords: Embrace the change by updating your practices and leveraging tools like renter’s insurance to protect your investment.

Have questions about AB 12 or need help with compliance? Contact our office or attorney specializing in landlord-tenant law. Stay informed, stay compliant, and keep California’s rental market moving forward