California Assembly Bill 12 (AB12) has brought major changes to how security deposits work for residential rentals in California, including San Diego. Effective July 1, 2024, this law limits the amount landlords can charge as a security deposit, making housing more affordable for tenants. For landlords in San Diego, understanding AB12 and related updates, like AB 2801, is essential to stay compliant and maintain smooth tenant relationships. This article explains the new rules, their impact, and practical steps for landlords to adapt.

What is California Assembly Bill 12 (AB12)?

AB12 is a state law that amends Section 1950.5 of the California Civil Code, which governs security deposits for residential rentals. Signed by Governor Gavin Newsom on October 11, 2023, and effective from July 1, 2024, AB12 aims to reduce the financial burden on tenants by capping security deposits. A security deposit is money paid by tenants to cover potential damages or unpaid rent, typically held by the landlord until the lease ends.

In high-rent cities like San Diego, where the average one-bedroom apartment costs about $2,341 per month (Apartments.com), high deposits can make renting difficult. AB12 addresses this by setting clear limits on deposit amounts, balancing tenant affordability with landlord protections.

Key Provisions of AB12

AB12 introduces specific rules for security deposits in residential rental agreements. Here are the main points:

• General Limit: For leases signed on or after July 1, 2024, landlords cannot charge a security deposit exceeding one month's rent, whether the property is furnished or unfurnished. This is a significant change from the previous limits of two months' rent for unfurnished units and three months' for furnished ones.
• Small Landlord Exception: Landlords who are natural persons or part of an LLC with all natural person members, and who own no more than two residential rental properties with a total of four or fewer dwelling units, can charge up to two months' rent as a security deposit. This exception does not apply if the tenant is a service member.
• Service Member Protection: Tenants who are service members (active-duty military personnel) are limited to a one-month rent deposit, even with small landlords. This ensures added protection for military tenants.

Tenant Type

Landlord Type

Max Security Deposit

Non-Service Member

Most Landlords

1 Month’s Rent

Non-Service Member

Small Landlord (≤2 properties, ≤4 units)

2 Months’ Rent

Service Member

All Landlords

1 Month’s Rent

How AB12 Impacts Landlords in San Diego

For San Diego landlords, AB12 means adjusting security deposit practices to comply with the new limits. Most landlords must now cap deposits at one month's rent. For a typical one-bedroom apartment renting at $2,341, this reduces the deposit from up to $4,682 (two months) to $2,341. This change lowers the upfront costs for tenants but may reduce the financial cushion landlords rely on for damages or unpaid rent.

Small landlords who qualify for the exception need to confirm their eligibility and verify if tenants are service members. The law may lead to increased financial risks, prompting some landlords to adopt stricter tenant screening processes, such as higher income requirements or more thorough credit checks (Kahana Feld). This could make it harder for some tenants to secure rentals, especially those with lower incomes.

Read the full AB12 text at California Legislative Information.

Recent Updates: AB 2801 and New Requirements

In 2025, California introduced AB 2801, which adds new rules for handling security deposits, effective at different points in the year (AB 2801 Bill Text). These changes aim to increase transparency and protect tenants from unfair deductions. Key requirements include:

• Photographic Documentation:
  • Move-In Photos: For tenancies starting on or after July 1, 2025, landlords must take photos of the rental unit at the start of the lease to document its condition.
  • Move-Out Photos: Since April 1, 2025, landlords must take photos after a tenant moves out, both before and after any repairs or cleanings for which they plan to deduct from the security deposit.
• Itemized Statement: When returning the security deposit, landlords must include these photos with a written explanation of any deductions, such as repair or cleaning costs.
• Compliance Risks: If landlords fail to follow these rules in bad faith, they may lose the ability to make claims against the security deposit. This emphasizes the need for careful record-keeping.

These requirements apply to all San Diego landlords and add a layer of administrative work but help prevent disputes over deposit deductions.

Compliance Tips for San Diego Landlords

To stay compliant with AB12 and AB 2801, landlords can take the following steps:

1. Update Lease Agreements: Revise lease templates to reflect the one-month deposit limit and include clauses about photo documentation requirements.
2. Verify Small Landlord Status: Check if you qualify for the two-month deposit exception by confirming property ownership and unit count.
3. Document Tenant Status: Ask prospective tenants if they are service members to apply the correct deposit limit.
4. Set Up Photo Systems: Use a smartphone or camera to take date-stamped photos at move-in, move-out, and before/after repairs. Store these securely in a digital folder or cloud service.
5. Use Property Management Tools: Apps like Azibo can help manage deposits, photos, and lease agreements efficiently.
6. Train Staff: Ensure property managers or staff understand the new laws and follow documentation protocols.

Benefits for Tenants

AB12 and AB 2801 provide significant advantages for San Diego tenants:

• Lower Costs: With deposits capped at one month's rent, tenants face less financial strain when moving in. For a $2,341 apartment, this saves up to $2,341 compared to previous limits.
• Greater Transparency: Required photos and itemized statements give tenants clear evidence of the property’s condition, reducing unfair deductions.
• Service Member Protections: Military tenants benefit from consistent one-month deposit caps, supporting their mobility needs.

These changes make renting more accessible, especially in a competitive market like San Diego.

Potential Challenges for Landlords

While AB12 aims to help tenants, it may create challenges for landlords:

• Reduced Financial Protection: Lower deposits mean less coverage for damages or unpaid rent, increasing financial risks (Kahana Feld).
• Increased Administrative Work: AB 2801’s photo requirements add time and effort to property management tasks.
• Market Impacts: Some landlords may raise rent or tighten screening to offset risks, potentially affecting tenant access to housing.

Landlords can mitigate these challenges by adopting efficient systems and staying informed about legal updates.

Frequently Asked Questions

What is the maximum security deposit under AB12?

For most landlords, the maximum is one month's rent. Small landlords with two or fewer properties (four or fewer units) can charge up to two months' rent, unless the tenant is a service member.

Do I qualify as a small landlord?

You qualify if you are a natural person or part of an LLC with all natural person members and own no more than two residential properties with a total of four or fewer units.

What are AB 2801’s photo requirements?

Since April 1, 2025, landlords must take photos after move-out, before and after repairs or cleanings. For tenancies starting July 1, 2025, photos are required at move-in. These must be included with the deposit return statement.

Does AB12 apply to existing leases?

AB12 applies to rental agreements signed on or after July 1, 2024. Existing leases before this date follow the old rules until renewed.

Conclusion

California’s AB12 and AB 2801 mark a shift toward tenant-friendly rental laws, impacting how San Diego landlords manage security deposits. By capping deposits and requiring detailed documentation, these laws aim to make housing more affordable and transparent. Landlords who adapt by updating leases, documenting property conditions, and using digital tools can comply effectively while building trust with tenants. Staying informed about these changes ensures compliance and supports a fair rental market in San Diego.

Explore more:

• A San Diego Landlord’s Guide to Late Rent Notices: Legal Tips and Best Practices