Assembly Bill 12, signed by Governor Newsom in October 2023 and effective July 1, 2024, fundamentally changed California's security deposit law. Prior law allowed landlords to collect up to two months' rent (unfurnished) or three months' rent (furnished) as a security deposit, plus a pet deposit.
AB 12 reduced the maximum security deposit to one month's rent for most landlords — regardless of whether the unit is furnished or unfurnished.
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| Category | Prior Law | AB 12 (Effective 7/1/2024) | |---|---|---| | Maximum deposit (unfurnished) | 2 months' rent | 1 month's rent | | Maximum deposit (furnished) | 3 months' rent | 1 month's rent | | Small landlord exception | None | 2 months' rent (see below) | | Pet deposits | Allowed separately | Included in 1-month cap |
Small landlord exception: A landlord who:
...may collect up to 2 months' rent as a security deposit.
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AB 12 did not change the rules governing use and return of deposits (Civil Code §1950.5):
Normal wear and tear is NOT a valid deduction — minor scuffs, nail holes from pictures, carpet wear from normal use. Damage deductions must be for beyond-normal deterioration.
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Brokers managing rental properties must update their lease forms and deposit practices for July 1, 2024 compliance:
1. New leases: Cannot collect more than 1 month's rent (or 2 months for qualifying small landlords) from any tenant entering a lease on or after July 1, 2024 2. Existing leases: If a deposit exceeds the new limits, there is no requirement to immediately refund the excess — but upon lease renewal, the excess should be addressed 3. Pet deposits: No longer a separate category; all deposits together (including pet) must be within the 1-month cap 4. Property management agreements: Must be reviewed and updated to reflect the new deposit limits
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The legislature found that high security deposits act as a barrier to housing for low- and moderate-income tenants, who cannot come up with 2-3 months of rent plus first and last month in high-cost California markets. The intent was to make rental housing more accessible by reducing upfront costs.
Critics argue the law increases risk for landlords on difficult tenants and may reduce the supply of rental housing.
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Quiz Questions:
Q1. A corporate landlord (LLC) owns 50 apartment units across 5 buildings in Los Angeles. Under AB 12 effective July 1, 2024, what is the maximum security deposit the landlord can collect on a 2-bedroom apartment renting for $3,500/month?
A) $7,000 (2 months) B) $10,500 (3 months furnished) C) $3,500 (1 month) D) $14,000 (4 months for commercial landlord)
Answer: C — The small landlord exception applies only to natural persons or family trusts owning no more than 2 properties. A corporate LLC with 50 units does not qualify. The maximum deposit under AB 12 is 1 month's rent = $3,500.
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Q2. A property manager is reviewing a tenant application. The tenant has a dog. Prior to AB 12, the manager collected first month ($2,800) + security deposit ($5,600 = 2 months) + pet deposit ($500) = $8,900 upfront. Under AB 12, what is the maximum the manager can collect on a new lease signed August 1, 2024?
A) $8,900 — pet deposits are exempt from AB 12 B) $5,600 — pet deposits add one additional month C) $2,800 — all deposits (including pet) must fit within the 1-month cap D) $4,200 — pet deposits are limited to a separate 50% of monthly rent cap
Answer: C — Under AB 12, ALL deposits (including any pet deposit) are aggregated and cannot exceed 1 month's rent. Pet deposits are no longer a separate category. The maximum total deposit for this unit is $2,800.
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Q3. A tenant moves out of a San Diego apartment. The landlord inspects and finds: (1) crayon marks on two walls, (2) a broken closet door, (3) minor carpet wear in the hallway, (4) a patch of carpet burned by a cigarette. The deposit was $2,000. Which items are valid deductions?
A) All four items are valid deductions from the security deposit B) Only (1) and (2) — wall marks and broken door; carpet items are wear and tear C) (1) crayon marks (cleaning/repainting), (2) broken closet door (damage), and (4) cigarette burn (damage beyond normal wear); (3) normal carpet wear is not deductible D) Only (4) the cigarette burn — all others are normal wear and tear
Answer: C — Crayon marks require cleaning/repainting (beyond normal wear), the broken closet door is damage, and the cigarette burn is clearly beyond normal wear. Normal hallway carpet wear from foot traffic is ordinary deterioration and cannot be charged to the tenant.
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Q4. A landlord fails to return a $2,500 security deposit or provide an itemized accounting within 21 days of the tenant vacating. The tenant sues and the court finds bad faith. What is the maximum the tenant can recover?
A) $2,500 (return of deposit only) B) $5,000 ($2,500 × 2 in statutory damages) plus attorney's fees in addition to the deposit C) $7,500 (3× deposit) plus punitive damages D) $2,500 plus $500 penalty per day of delay
Answer: B — Civil Code §1950.5 allows recovery of the deposit plus up to 2x the deposit amount as statutory damages for bad faith retention, plus attorney's fees and costs. The maximum recovery is the $2,500 deposit + $5,000 statutory damages = $7,500 total plus fees.
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Q5. A couple who owns a single-family rental home (as a family trust) and a duplex (also as family trust) wants to know their maximum security deposit under AB 12 on a new lease for the SFR at $4,200/month.
A) $4,200 (1 month) — AB 12 applies without exception B) $8,400 (2 months) — they qualify as small landlords under the exception C) $12,600 (3 months) — furnished units are exempt D) $16,800 (4 months) — family trusts are exempt from AB 12 entirely
Answer: B — The small landlord exception in AB 12 covers natural persons or family trusts owning no more than 2 residential rental properties with no more than 4 total units. A family trust owning an SFR and a duplex (3 units total, 2 properties) qualifies. They may collect up to 2 months' rent = $8,400 as a security deposit.