California Security Deposit and Late Fee Rules After AB 12
Updated 2026-07-19 · 6 min read · General information, not legal advice
California rewrote its deposit math in 2024: AB 12 amended Civil Code §1950.5 to cap security deposits at one month’s rent for deposits collected on or after July 1, 2024 — furnished or not. Late fees never got a fixed cap; they answer instead to California’s liquidated-damages doctrine. Both are places where an older lease form quietly conflicts with current law.
The deposit cap — and the narrow exception (Civil Code §1950.5)
The general rule is one month’s rent. A limited exception allows up to two months: the owner must be a natural person (or an LLC made up entirely of natural persons) who owns no more than two residential rental properties totaling no more than four units — and the exception does not apply when the tenant is a service member. Whether a particular owner qualifies is a fact question the lease itself cannot answer.
Every deposit is refundable
§1950.5 does not permit a lease to characterize any security deposit as non-refundable. Clauses like “$400 of the deposit is a non-refundable cleaning fee” — common in older forms — conflict with the statute’s text regardless of the label used.
What the deposit can cover, and the 21-day clock
- Unpaid rent
- Repair of damage beyond normal wear and tear
- Cleaning, to return the unit to the level of cleanliness at move-in
- If the lease allows it, restoring or replacing landlord personal property
Within 21 calendar days of move-out, the statute requires the deposit back or an itemized statement of deductions — with copies of receipts or invoices for any charge over $125. Note the contrast with Massachusetts: California does allow cleaning deductions, but only to restore move-in level cleanliness, not as a flat move-out fee. Bad-faith retention carries a statutory penalty of up to twice the deposit on top of the amount owed.
Late fees: no fixed cap, a real doctrine (Civil Code §1671)
California has no statute naming a maximum late fee. Instead, a late fee is a liquidated-damages clause, enforceable under Civil Code §1671 when it represents a reasonable estimate of the landlord’s actual costs from a late payment. Fees that are large relative to the rent, accrue daily without bound, or state no basis at all have been challenged as unenforceable penalties. A lease reciting that a fee “is agreed to be reasonable” states a conclusion, not a basis — whether a specific fee holds up is a question for counsel.
What Leasella checks
For California properties, Leasella’s lease review flags deposits above one month’s rent (noting the small-owner exception is a fact question), any deposit portion labeled non-refundable, deduction clauses broader than the statutory list, and late fees with penalty characteristics — large, daily-accruing, or basis-free — each finding quoting the clause it came from. The reconciliation audit then cross-references the amounts your statements show you actually collected.