What does California AB 12 do?

AB 12 amended California Civil Code §1950.5 to cap most residential security deposits at one month's rent, regardless of whether the unit is furnished. The change took effect July 1, 2024. Prior law allowed up to two months for unfurnished units and three months for furnished. AB 12 also preserves a limited exception allowing small landlords to collect up to two months under specific conditions.

Does AB 12 apply to leases signed before July 1, 2024?

No. AB 12 applies to leases entered into or modified on or after July 1, 2024. Deposits lawfully collected under prior law on pre-existing tenancies don't auto-refund to the new one-month cap. Those deposits travel with the unit at their existing balance under Civil Code §1950.5. New leases or substantial lease modifications after the effective date follow AB 12's cap.

Who qualifies for the AB 12 small-landlord exception?

The exception allows up to two months rent as a deposit for landlords who own no more than two residential rental properties totaling no more than four units, and who are natural persons or LLCs whose members are all natural persons. Real estate investment trusts, corporations, and similar entities don't qualify. The exception also doesn't apply when the prospective tenant is an active-duty service member; existing service-member protections preserve a one-month cap regardless.

Does AB 12 apply to furnished units?

Yes. Unlike prior law, AB 12 doesn't distinguish between furnished and unfurnished units. The one-month cap applies regardless. This is a significant change for owners renting furnished properties, who previously could collect up to three months rent.

What are the penalties for collecting more than AB 12 allows?

Charging a deposit above the AB 12 cap creates exposure under existing Civil Code §1950.5 remedies. Tenants can demand return of any excess deposit, and bad-faith violations can support statutory damages of up to twice the deposit amount in addition to actual damages. The dispute typically goes through small claims court when amounts are within the jurisdictional limit.

What about pet deposits and pet rent under AB 12?

Pet deposits are part of the total security deposit and count against the AB 12 one-month cap. Some pet-related charges may be structured as ongoing pet rent or non-refundable cleaning fees rather than deposits — those have different legal characterization and aren't subject to the §1950.5 deposit cap, but they have their own rules. Consult California-specific guidance before adding pet-related charges.

AB 12 — California's One-Month Security Deposit Cap

California's AB 12 took effect July 1, 2024 and represents the most significant change to residential security deposit law in decades. It amended Civil Code §1950.5 to cap most residential security deposits at one month's rent. The prior structure — up to two months for unfurnished units, up to three months for furnished — is gone for new leases. The change affects every California rental owner, every property manager, and every renter signing a new lease.

What AB 12 actually changed

AB 12 made three core changes to California residential security deposit law:

One-month cap, period. The maximum security deposit for most residential tenancies is now one month's rent, regardless of whether the unit is furnished or unfurnished. The furnished/unfurnished distinction that allowed higher caps under prior law is eliminated.
Small-landlord exception preserved. A narrow exception allows landlords who own no more than two residential rental properties totaling no more than four units to collect up to two months as a deposit, under specific entity-form conditions.
Effective July 1, 2024 for new and modified leases. Existing tenancies with deposits lawfully collected under prior law are not retroactively affected. The new cap applies to leases entered into or substantially modified on or after the effective date.

The legal text lives at California Civil Code §1950.5. Read the statute directly at leginfo.legislature.ca.gov. For the broader §1950.5 framework that AB 12 amended, see our §1950.5 explainer.

The deposit math: before and after AB 12

For owners trying to understand what AB 12 changed for the deposits they can collect:

Monthly rent	Pre-AB 12 max (unfurnished)	Pre-AB 12 max (furnished)	AB 12 max (most owners)	AB 12 max (small-landlord exception)
$2,500	$5,000	$7,500	$2,500	$5,000
$3,000	$6,000	$9,000	$3,000	$6,000
$4,000	$8,000	$12,000	$4,000	$8,000
$5,000	$10,000	$15,000	$5,000	$10,000
$7,500	$15,000	$22,500	$7,500	$15,000

On a typical Orange County $4,000-rent unit, the maximum deposit dropped from $8,000 (or $12,000 furnished) to $4,000. That's a meaningful change in the cushion owners have against tenant damage at move-out, particularly on higher-value properties where finishes and fixtures are expensive to repair.

The small-landlord exception: who actually qualifies

AB 12 preserved a narrow exception that lets some small landlords continue collecting up to two months rent as a deposit. The exception's conditions are specific and worth checking carefully:

Ownership limit. The landlord (or all the landlords collectively, if multiple) must own no more than two residential rental properties.
Unit limit. Those properties must total no more than four residential rental units combined.
Entity form. The landlord must be a natural person, or a limited liability company in which all members are natural persons. Corporations, REITs, and other business entities don't qualify.
Service-member exclusion. The exception doesn't apply when renting to an active-duty service member. Existing service-member protections require the one-month cap regardless of small-landlord status.

If you own three or more residential rental properties, or your total unit count exceeds four, you don't get the exception — even if each individual property is small. The exception's logic is to protect single-family homeowners and small-portfolio investors, not larger landlords with concentrated holdings.

Verify the current statutory language and any amendments at leginfo.legislature.ca.gov before relying on the exception. AB 12's small-landlord conditions are detailed and small misreads (e.g., counting a property held in a different entity) can change the analysis.

How AB 12 interacts with existing tenancies

The most common owner question on AB 12: do I have to refund the difference between what I collected pre-AB 12 and the new one-month cap?

No. AB 12 applies to leases entered into or modified on or after July 1, 2024. Deposits lawfully collected under prior law on leases that pre-date the effective date are not retroactively affected. The deposit you currently hold on a 2022 lease at the prior two-month structure stays at the existing balance. The 21-day move-out accounting still applies at the deposit's existing amount, and the deposit transfers with the unit under §1950.5 at that amount if you change management firms.

The complication is at lease renewal. If an existing tenant signs a new lease (not just a month-to-month rollover but a freshly executed renewal lease), and the renewal is treated as a new lease for AB 12 purposes, the new cap may apply going forward. This is a fact-specific area; consult California real estate counsel if you're handling a renewal on a unit with a pre-AB 12 deposit balance and the answer affects significant amounts.

Penalties for violating AB 12

Collecting a deposit above the AB 12 cap creates two layers of exposure:

Mandatory return of excess. The tenant can demand return of any amount above the lawful cap. Refusing to return creates direct liability for the overcharge plus potential bad-faith damages.
Statutory damages under §1950.5(l). A landlord who in bad faith retains deposit funds in violation of §1950.5 may be subject to statutory damages of up to twice the deposit amount, in addition to actual damages. The bad-faith standard requires more than negligent miscalculation, but explicit knowledge that the deposit exceeded the cap and refusal to refund typically meets it.

Disputes over excess deposits typically go through small claims court when amounts are within the jurisdictional limit (verify the current California small-claims limit at selfhelp.courts.ca.gov), or through superior court for larger amounts. See our small-claims guide for the procedural specifics.

What California property managers must change operationally

For property management firms operating in California, AB 12 requires several specific operational changes:

Update lease templates. Any lease template still drafted with a "two months unfurnished, three months furnished" structure is non-compliant on new leases. The template needs to reflect the one-month cap by default, with the small-landlord exception only invoked when the owner actually qualifies and the rental falls within the exception's scope.
Update screening criteria. Income multiples and deposit-equivalent calculations that built in a higher deposit cap need rebalancing. Some firms used the higher deposit cap as a screening cushion for marginal applicants; that cushion is smaller now.
Review existing-tenancy renewal handling. When existing tenants on pre-AB 12 leases sign renewals, the firm needs a documented position on whether the renewal triggers AB 12. Inconsistent handling across the portfolio creates exposure.
Update owner education. Owners moving to the firm from another manager (or from self-management) need clear communication about what they can and can't collect on new tenancies. Firms that don't proactively educate owners on AB 12 are setting them up to make collection mistakes.
Train staff on the small-landlord exception. The exception's entity-form and ownership conditions are easy to misapply. Staff need training on when it applies and how to document owner qualification.

A property manager who hasn't visibly updated their lease template and operational playbook for AB 12 is a manager creating compliance risk that lands on the owner. Ask your current firm in writing: "Send me the version history of your lease template since July 2024, and confirm in writing how you're applying AB 12 on new tenancies." A current firm produces a real answer.

AB 12 in context: California's evolving tenant-protection framework

AB 12 doesn't exist in isolation. It's part of a multi-year tightening of California residential rental law that California owners need to track collectively:

AB 1482 (Tenant Protection Act of 2019). Statewide rent cap (5% plus regional CPI, capped at 10%) and just-cause eviction framework on covered units. See our AB 1482 guide.
SB 567 (2024). Tightened AB 1482's just-cause framework, particularly substantial-remodel and owner-move-in categories. See our SB 567 guide.
AB 12 (2024). One-month deposit cap.
Local rent stabilization ordinances. Santa Ana, Long Beach, LA, San Francisco, and a growing list of California cities overlay local rules. See our rent control cities list.
Civil Code §1950.5 in general. The framework that AB 12 amended, covering deposit handling, the 21-day move-out accounting, transfer on ownership or management change. See the §1950.5 explainer.
Civil Code §1962. Tenant notice of property manager changes. See the §1962 guide.

An owner or property manager operating without awareness of how these statutes interact is creating exposure that compounds across categories. The one-month deposit cap means less cushion at move-out, which means more careful tenant screening upfront. The just-cause framework means non-fault terminations require documentation and relocation assistance. The cap calculations on AB 1482 require accurate rent history. Compliance isn't optional and it's not a one-time setup.