California landlords will soon have more flexibility — and clearer rules — for returning tenants’ security deposits.
Governor Gavin Newsom has signed Assembly Bill 414 (AB 414), introduced by Assembly Member Gail Pellerin (D-Santa Cruz), modernizing how deposits can be refunded and itemized statements delivered.
The new law takes effect January 1, 2026 and aims to streamline the process for both landlords and tenants in an increasingly digital world.
Key Updates Under AB 414
1. Electronic Refunds Now Allowed at Any Time
Under current law, landlords and tenants could only agree to an electronic refund after a notice of termination had been issued.
Starting in 2026, that restriction goes away.
✅ Landlords and tenants can now agree at any point — even when the lease is first signed — to use electronic transfers for returning security deposits.
If the landlord received rent or the security deposit electronically, they must return the deposit the same way, unless both parties agree in writing to use another method.
That means:
- If the tenant paid via bank transfer, Zelle, Venmo, or similar, the refund must also be electronic (unless otherwise agreed).
- If the refund is made electronically, tenants must provide the correct account information.
- The parties may instead agree in writing to use a paper check or another preferred method.
This change brings more convenience and consistency, especially for owners who already manage digital rent payments.
2. Itemized Statements Can Be Sent by Email
Previously, landlords could only send the itemized statement of deductions by email after a tenancy ended.
AB 414 removes that limitation.
✅ Now, landlords and tenants can agree — at any point — to receive the statement by email.
This small but significant update simplifies communication and reduces paperwork, especially for property owners managing multiple units or long-term tenants.
3. Clearer Rules for Multiple Tenants
AB 414 also clarifies what to do when more than one tenant is listed on a lease.
By default, the refund should be:
- A single check made payable to all adult tenants named on the rental agreement at the time the tenancy ends.
- The check may be mailed to any one of those tenants.
This default provides clear direction when roommates can’t be reached or disagree on who should receive the refund.
Landlords and tenants may still agree in writing to a different arrangement if preferred.
Summary: What Changes for Landlords
| Topic | What Changes Under AB 414 |
|---|---|
| Electronic refunds | Landlords and tenants can agree at any time — even at lease signing — on how deposits will be returned, including electronically. |
| Email statements | The parties can agree to send itemized deduction statements by email at any time. |
| Multiple tenants | Default refund method is one check payable to all adult tenants, mailed to any one of them. |
| Matching payment method | If rent or deposits were paid electronically, refunds must be made electronically unless both parties agree otherwise. |
Effective Date
Governor Newsom signed AB 414 into law on October 6, 2024, and it takes effect January 1, 2026.
This gives landlords and property managers time to update lease templates, accounting procedures, and tenant communication methods.
What Property Owners Should Do Now
- Review lease templates – Add a clause outlining the chosen method for returning deposits (electronic, paper check, or other).
- Update your systems – Ensure your payment platform or bookkeeping software can process refunds electronically.
- Confirm tenant contact information – Collect or verify current email addresses and payment details to avoid delays.
- Document all agreements – Keep written confirmation of any arrangements outside the default method.
- Educate staff and tenants – Make sure everyone understands how these changes affect move-out procedures.
The Bottom Line
AB 414 gives landlords more flexibility — and tenants more predictability — when it comes to returning security deposits.
By moving toward digital payment and communication options, California is modernizing an area of rental law that hasn’t kept up with today’s technology.
When AB 414 takes effect in 2026, landlords who prepare now will enjoy smoother, faster, and better-documented move-outs.
