Introduction

If you're a landlord or property manager in California, it's time to recalibrate.

In the last two years, state legislators have significantly expanded tenant protections—and in doing so, have raised the bar for compliance on security deposit handling, move-out inspections, documentation, and recordkeeping.

With the passage of Assembly Bill 12 (2023) and Assembly Bill 2801 (2024), California has moved beyond simply protecting tenants from unfair deductions; it's now requiring landlords to maintain a level of documentation and procedural accuracy that rivals a small claims courtroom.

This article highlights what’s changed, what’s required, and where landlords are most at risk.

1. Security Deposit Limits: AB 12 Caps the Amount

As of July 1, 2024, landlords can no longer require the previously common “first, last, and security” combo.

AB 12 limits security deposits to:

• One month’s rent for unfurnished units
• Limited exceptions

This applies to all residential rental agreements.

2. The New Inspection Protocol: Civil Code § 1950.5(f)

California Civil Code § 1950.5 has long governed security deposit use, but recent enforcement and case law trends now favor tenants—and AB 2801 adds even more teeth.

Initial Inspections Now Matter More Than Ever:

• Tenants have the right to an “initial inspection” before move-out.
• Landlords must:
  • Offer the inspection in writing with required legal disclosures
  • Schedule at a mutually agreed time
  • Provide a written itemized list of issues the tenant may fix to avoid deductions
  • Deliver the list on-site or inside the unit, and include statutory citation of allowed deposit uses

Failing to follow these steps can make all post-move-out deductions legally void.

3. “No Surprise” Deductions: AB 2801 Closes Loopholes

Under AB 2801, which took effect April 1, 2025, landlords who conduct an initial inspection cannot later deduct for damage that:

• Was reasonably visible during the walk-through, and
• Wasn’t included on the itemized pre-move-out list.

This means you get one bite at the apple: If it’s not on the inspection list, you’re likely barred from charging for it later.

Narrow Exceptions:

• New damage caused after the initial inspection (but before move-out)
• Damage previously concealed by furniture or tenant belongings

4. Documentation Overload: Photo Evidence Now Required

Under AB 2801, landlords must photograph and document each stage of the move-out process—regardless of whether the tenant disputes the deductions.

You now need:

• Move-In Photos: Date-stamped, taken before tenant occupancy
• Move-Out Photos: Taken after the tenant vacates but before any cleaning or repair
• Post-Repair Photos: Taken after work is completed to support deducted charges

These photos must be provided to the tenant along with the final deposit accounting—within 21 calendar days after move-out.

5. Receipts, Invoices, and Explanations Are Now Mandatory

Landlords must now include:

• Receipts or invoices for any third-party vendor or material costs
• Narrative explanations for each deduction (e.g., "cleaning by ABC Cleaning Co. due to grease buildup on stove – $180")

If total deductions are under $125, documentation is optional unless the tenant requests it—then you must deliver all supporting documentation within 14 days.

6. The Risk Is Real—Even for Institutional Owners and Trustees

These requirements apply regardless of the property owner—whether you're a private landlord, property management firm, institutional investor, or court-appointed trustee.

Failure to comply exposes the landlord to:

• Forfeiture of the entire deposit
• Statutory penalties
• Legal fees and court costs
• Increased scrutiny in future tenant disputes or unlawful detainer actions

For estate or trust-held properties, this can create unwanted liability for fiduciaries and delay asset disposition or trust closure.

Key Takeaways

Final Word

If you manage or advise on residential rental property in California, it's time to rethink your move-out and deposit procedures. These changes aren't just red tape—they're litigation traps for landlords who don’t update their processes.

The best protection is:

• Proactive compliance
• Detailed documentation
• Clear, timely communication with tenants

If you're managing real estate on behalf of an estate, trust, or through a receivership, these legal changes carry additional weight. Compliance is not optional—it's a fiduciary obligation.