Posted: January 2026
Prepared by ReLISTO
A new California law — Assembly Bill 414 (AB 414) — is now in effect and will significantly change how landlords and property managers handle security deposits.
This law was passed in October 2025 and became active almost immediately, applying to new tenancies starting in 2026. While the intention may be to protect tenants, the speed of implementation presents real challenges for small landlords and housing providers.
What Changed?
The biggest change is this: If your tenant pays their security deposit through wire, ACH, or Zelle, you are now required to return it in the same manner — unless the tenant provides written authorization for you to return it another way (like by check). This is now part of California Civil Code §1950.5(h).
What Landlords Must Do
If you accept deposits electronically and want to return the deposit by check, you must obtain a written agreement from the tenant stating they agree to that method.
A landlord failing to follow this could result in:
- Loss of the right to claim any portion of the deposit
- Statutory damages of up to twice the deposit amount
Sample Agreement Language (For Tenants to Sign)
You can use the following clause or form to get written consent to return the deposit by check:
Security Deposit Return – Alternative Payment Method Agreement
This Addendum is incorporated into and made part of the Residential Lease Agreement
between Landlord and Tenant.
1. Acknowledgment of Electronic Payment
Tenant acknowledges that the security deposit was paid electronically, including but not
limited to payment by ACH, wire transfer, Zelle, or an online payment platform.
2. Notice of Statutory Right
Tenant is hereby notified that, under California Civil Code §1950.5, as amended by Assembly
Bill 414, when a security deposit is paid electronically, the Tenant has the right to receive
any refund of the security deposit electronically in the same manner or by an electronic method.
3. Voluntary Agreement to Alternative Method
Tenant voluntarily elects and agrees to receive any refund of the security deposit by check,
rather than electronically. Tenant understands that this election is optional and is not
required as a condition of tenancy.
4. Delivery of Refund
The refund check shall be made payable to the Tenant and mailed to the forwarding address
provided by Tenant within 21 days of move-out. If Tenant does not provide a forwarding address,
the refund check shall be mailed to Tenant’s last known address in compliance with applicable law.
5. No Waiver of Other Rights
This Addendum applies solely to the method of refund delivery and does not waive or alter any
other Tenant rights under California law, including but not limited to the statutory timeframe
for return of the security deposit and the requirement for an itemized statement of deductions.
Tenant Acknowledgment and Agreement
By signing below, Tenant acknowledges receipt of this notice, understands their right to receive
an electronic refund, and voluntarily agrees to the alternative refund method described above.
Tenant Name(s): _______________________________
Tenant Signature(s): __________________ Date: ____________
Landlord/Agent Signature: _____________ Date: ____________
Disclaimer: This sample agreement is provided for informational purposes only and does not constitute legal advice. Use of this form does not guarantee compliance with California Civil Code §1950.5 or other applicable laws. Landlords and property managers are strongly encouraged to consult with qualified legal counsel to ensure that any security deposit procedures, forms, or agreements are compliant with current state and local laws. ReLISTO and its affiliates are not responsible for any liability or damages arising from the use or misuse of this form.
Summary of California Security Deposit Laws (As of 2026)
Since there have been multiple changes lately, I have listed below a summary of the most current rules as we understand them that California landlords must follow:
Security Deposit Limits
– 1 month’s rent max for most rentals
– 2 months’ rent max only allowed for: Individual landlords or LLCs of natural persons or Owning no more than two properties totaling four units
– Service members: Never more than 1 month’s rent
Deadline to Return: Must return any unused portion of the deposit within 21 calendar days after the tenant vacates.
Return Method
– If paid electronically: Must be returned electronically
– Can only return via check if: The tenant signs a written agreement allowing it
– For multiple tenants: Default: Check made payable to all adult tenants. Can be changed with a written agreement (as will be required if sending electronically)
Required Photos
– Before tenancy begins
– After move-out, both: Before deductions/repairs and After work is completed
– Photos must be shared with the tenant via email, mail, or online link
Itemized Statement Requirements
Must include:
– Reasonable breakdown of deductions
– Receipts/invoices
– Labor costs with hourly rates
– Photos of damage or cleaning issues
– Can be delivered by mail or email (email only with tenant’s written/signed consent)
What Can Be Deducted
Allowed:
– Unpaid rent
– Damage beyond normal wear
– Cleaning to restore to move-in condition
Not allowed:
– Normal wear and tear
– Pre-existing conditions
Optional Pre-Move-Out Inspection
Tenants have the right to request a walkthrough before moving out. Landlords must:
– Give 48-hour notice
– Provide an itemized list of deductions
– Allow time to correct issues
Penalties for Non-Compliance
If a landlord wrongfully withholds a deposit or violates return procedures:
– May owe up to 2x the deposit in damages
_ The burden of proof falls on the landlord
Why This Matters
While the intent behind AB 414 is to improve transparency and strengthen tenant protections, the speed of its implementation has left many small landlords and property managers with little time to adjust internal systems and documentation. If you are a legislator, I strongly urge you to consider allowing more time between the passage and the enforcement of new housing laws — a one-year implementation window would be a reasonable and fair standard.
At ReLISTO, we remain committed to helping our landlord clients stay compliant, stay informed, and navigate the ever-changing landscape of California rental laws. We advocate for landlords while supporting independent owners in securing qualified tenants, and we also provide full-service property management.
We proudly serve San Francisco, the Peninsula, East Bay, North Bay, and surrounding areas. Contact us if you need expert help with leasing or managing your rental property — whether it’s a home, condo, or apartment.
