Blog

Security deposits are one of the most litigated areas of California landlord-tenant law. Get it wrong, and you could face penalties, lose an eviction case, or end up owing your tenant money—even when they owe you rent. With enforcement tightening in 2026, every LA landlord needs to understand the current rules.

How Much Can You Charge?

California law limits security deposits to one month’s rent for unfurnished units and two months’ rent for furnished units. There is no distinction between a “security deposit,” “cleaning deposit,” or “last month’s rent”—they all count toward the same cap. Any amount collected beyond first month’s rent is considered a security deposit under the law.

The RSO Interest Requirement

If your property is covered by the City of LA’s Rent Stabilization Ordinance, you are required to pay annual interest on security deposits. The interest rate is set each year and must be paid annually on the anniversary of the tenancy or credited against rent. In 2025, the rate was approximately 4.32%—a significant increase from prior years.
This requirement has been the law for years, but it’s now being aggressively used as a defense in eviction cases. Tenant attorneys routinely check whether deposit interest has been paid, and courts are dismissing eviction cases where landlords haven’t complied—even when rent is clearly owed. This single oversight can derail an entire eviction proceeding.

Returning the Deposit

When a tenant moves out, you have 21 calendar days to either return the full deposit or provide an itemized statement of deductions along with the remaining balance. The statement must be specific—vague descriptions like “cleaning” or “damages” aren’t sufficient. You need to describe the specific damage, its location, and the actual or estimated cost of repair.
As of recent updates (AB 414), landlords must also offer to return the deposit electronically in certain circumstances, and new flexibility exists for alternative return arrangements if agreed upon by both parties.

What You Can and Cannot Deduct

• Allowable deductions: Unpaid rent, cleaning costs to restore the unit to the condition it was in at move-in (beyond normal wear and tear), and repair of damages caused by the tenant beyond normal wear and tear.
• Not allowable: Normal wear and tear (paint fading, carpet wearing thin from normal use, minor scuff marks), pre-existing damage, and improvements or upgrades you wanted to make anyway.

The distinction between “damage” and “normal wear and tear” is one of the most common disputes in landlord-tenant law. Thorough move-in and move-out inspections with photos and written documentation are your best protection.

Move-In and Move-Out Inspections

California law gives tenants the right to request a pre-move-out inspection. If requested, you must conduct the inspection no earlier than two weeks before the end of the tenancy and provide the tenant with an itemized list of proposed deductions. This gives the tenant an opportunity to make repairs before move-out and potentially get their full deposit back.
Whether or not the tenant requests it, you should always conduct detailed move-in and move-out inspections. Document the condition of every room, every appliance, and every surface with timestamped photos. This documentation is your defense if a deposit dispute goes to court.

Penalties for Non-Compliance

If you fail to return the deposit or provide an itemized statement within 21 days, the tenant can sue you in small claims court for up to twice the deposit amount in bad faith penalties, plus the deposit itself. If you fail to pay RSO-required annual interest, your eviction case can be dismissed. The stakes are high.

Let King George Handle It

At King George Property Management, we track security deposit interest obligations, conduct detailed move-in and move-out inspections with comprehensive photo documentation, process deposit returns within the 21-day window, and provide legally compliant itemized statements. It’s one of the many compliance areas where professional management protects you from costly mistakes.
Questions about your deposit obligations? Contact us for a free consultation.

• Phone: (818) 739-1105
• Address: 4645 Van Nuys Blvd, Suite 201, Sherman Oaks, CA 91403
• Web: kgpm.com