What San Francisco Landlords Need to Know About California Security Deposits

The Legal Exposure Is Higher Than Most Landlords Realize

Many landlords assume that delegating deposit handling to a property manager transfers the legal responsibility. It does not. Under California law, the owner is legally responsible for the actions of their property manager and agent. If something goes wrong, the owner is the one standing in small claims court, without an attorney, facing a judgment of up to $12,500 plus a bad faith penalty of up to twice the deposit amount.

That is not a hypothetical. It is the default outcome when a court finds bad faith, and the penalty is automatic.

What You Can Actually Collect

AB 12, which took effect July 1, 2024, capped security deposits at one month's rent for most landlords, regardless of whether the unit is furnished or unfurnished. A small landlord exemption applies if the landlord is a natural person or LLC made up entirely of natural persons, owns no more than two residential rental properties, and rents no more than four units total. Qualifying small landlords may collect up to two months' rent.

One thing that does not change regardless of category: no additional deposit can be charged for an emotional support animal or service animal, even if you already charge a pet deposit for other animals. Getting this wrong is a fair housing violation, not a deposit dispute, and the consequences are significantly more serious.

There is also what is known as the naming trap. California law does not care what a move-in charge is called. A key deposit, pet deposit, move-in fee, admin fee, or mandatory cleaning fee are all treated as security deposits and count against the legal limit. There is no such thing as a nonrefundable security deposit under California law.

What You Can Deduct

Legal deductions fall into three categories: unpaid rent, cleaning to restore the unit to the condition it was in at move-in, and repairs for damage beyond normal wear and tear. That last category requires documentation, meaning photos and receipts.

Normal wear and tear is not deductible. Faded paint, minor carpet wear from everyday use, small nail holes from pictures, and worn door handles are all examples of what a landlord cannot charge back to a tenant. Deductions that fall outside the three legal buckets, or that cannot be documented, will not hold up.

Photo Requirements Have Changed

Under AB 2801, the number of required photo sets now depends on when the tenant moved in.

For tenancies that began before July 1, 2025, two sets are required: one taken after the tenant moves out but before any repairs or cleaning, and one taken after. For tenancies beginning July 1, 2025 or later, three sets are required: move-in photos, move-out photos before repairs, and move-out photos after repairs.

All photos must be delivered to the tenant along with the itemized statement within 21 days. A 360-degree camera for interiors and a wide-angle setting for exterior shots provide the most comprehensive coverage and are the hardest to dispute. Everything should be stored in a timestamped cloud folder.

The 21-Day Rule Is Absolute

Once a tenant returns possession of the unit, the clock starts. Landlords have 21 calendar days to send the deposit return, itemized deduction list, all required photo sets, and any receipts or invoices. Miss that deadline and the right to make any deductions is forfeited entirely, regardless of what the tenant actually owed.

If repair costs are not finalized within 21 days, an estimate can be sent along with whatever deposit balance is being returned, with the final invoice to follow once work is complete. But the 21-day window cannot be extended or ignored. AB 414 also requires landlords to return the deposit by the method the tenant designates, whether electronic or paper check, and that preference should be documented in the lease.

Itemized Statements That Hold Up

For any deduction over $125, an invoice or receipt is required. Every itemized statement must include the total deposit collected, the amount being returned, each deduction with a description and dollar amount, supporting photos, and copies of all invoices. Sloppy documentation is the number one reason landlords lose deposit disputes in small claims court.



If a property manager is involved, it is worth asking directly: who prepares the itemized statement, who tracks receipts and invoices, who sends the statement, and who shows up to small claims if the tenant disputes it? Those are not small questions, and the answers should be clear before a dispute arises.