Quick summary
California’s AB 414 (Pellerin) amends Civil Code §1950.5 to modernize how landlords return residential security deposits and deliver the required itemized statements. If the tenant paid rent or the deposit electronically, you generally must return any remaining deposit electronically unless you and the tenant agreed in writing to a different method. The new rules also let landlords and tenants agree at any time on how refunds and itemized statements will be sent, including via email, not only after a move-out notice. Most provisions apply beginning January 1, 2026.
What AB 414 actually does
AB 414 focuses on the mechanics of returning security deposits and delivering the itemized accounting after move-out. The bill:
- Requires electronic refund if payments were electronic
When a tenant paid rent or the security deposit electronically, the landlord must return the remaining balance electronically, unless both sides have designated another method in writing. - Allows the parties to choose delivery methods at any time
Landlords and tenants may agree at any time on how the deposit refund and itemized statement will be delivered, including by email or electronic transfer. This is no longer limited to the short window after the tenant gives a notice to vacate. - Clarifies logistics for multiple tenants
The law addresses scenarios with co-tenants on a single lease so that refunds and statements can be handled cleanly when more than one payee is involved. Industry groups removed opposition once these details were added. - Leaves core deadlines and permissible deductions intact
AB 414 does not change the 21-day deadline to mail or deliver the itemized statement and any remaining deposit, or the existing limits on what you can deduct. Those rules still come from Civil Code §1950.5.
Effective date: The new electronic-return framework and expanded delivery options apply beginning January 1, 2026.
Why California changed the rules
Modern payments are the norm. Most residents now pay rent online. The Legislature aligned refunds with how money came in to reduce paper checks, cut processing time, and minimize “lost in the mail” disputes.
Cleaner audit trails were another driver. Electronic transfers, email acknowledgments, and documented designations produce clear, time-stamped records that help resolve disputes and demonstrate compliance.
What does not change under AB 414
The 21-day clock remains. You still have 21 calendar days after a tenant moves out to send the itemized statement and any remaining deposit.
Permissible deductions stay the same—unpaid rent, cleaning to restore the unit to its initial condition, and repairs for damage beyond ordinary wear and tear.
You should continue to request a forwarding address and preferred payment method before move-out, now with an eye toward electronic refunds by default when prior payments were electronic.
Compliance checklist for landlords and asset managers
Use this step-by-step process to prepare your portfolio before January 1, 2026.
1) Update your leases and addenda
Add an “Electronic Refund and Notice Delivery” clause that:
- Notes whether rent and security deposits were paid electronically.
- Captures the tenant’s designated bank details or digital wallet for refunds.
- Captures the tenant’s designated email for itemized statements and notices.
- States that the parties may modify designations in writing at any time.
Add a co-tenant instruction for joint and several tenants that: - Identifies a single payee or describes how a refund will be split.
- Explains that the refund method will follow the parties’ written designation or, if none, the statutory default.
2) Standardize your move-out workflow
At notice of intent to vacate, confirm forwarding contact info, preferred delivery method for the itemized statement, and refund routing. Re-confirm electronic method if prior payments were electronic and no alternative is designated.
During the pre-move-out inspection, offer the optional walkthrough, document potential deductions, and provide the preliminary list so the resident can address issues.
Within 21 days after move-out, send the itemized statement via the designated channel (including email when agreed), return any remaining deposit using the designated electronic method if prior payments were electronic, and include receipts or estimates where required.
3) Align your software and banking
Enable outbound ACH and digital disbursements. Make sure your property-management platform and trust account can originate outbound ACH and issue electronic refunds securely.
Template your itemized statements for email, including receipts and detailed accounting fields that meet §1950.5 requirements.
4) Document everything
Maintain digital audit trails—save tenant designations, screenshots or PDFs of transfers, email confirmations, and timestamps to show you met the 21-day deadline.
Store consent logs showing when and how tenants agreed to electronic delivery and refund methods.
Special scenarios and how to handle them
When multiple tenants share a lease, ask co-tenants to name a single recipient for the electronic refund or provide a signed written allocation before disbursing.
If rent and the deposit were never paid electronically and no electronic designation exists, you may still return by check or personal delivery.
If a tenant changes banks right before move-out, AB 414 allows updates at any time—just keep a written, time-stamped record.
If an electronic delivery fails (email bounce or ACH return), contact the tenant immediately, document the attempt, and re-send within the original 21-day window.
Common mistakes to avoid
Mailing checks when rent was paid electronically could violate AB 414 starting 2026 unless you have a signed written agreement specifying another method.
Waiting to set delivery preferences is risky. Capture them at lease signing and confirm during renewals.
Weak documentation for deductions remains a leading cause of disputes—keep photos, invoices, and digital records.
How AB 414 fits with other recent landlord laws
AB 414 is part of California’s broader 2025 housing package aimed at streamlining processes and improving transparency. It complements existing Civil Code §1950.5 requirements without changing the core tenant protections. The Governor’s office noted that the bill ensures tenants can receive deposit refunds in the same digital form they used for rent payments.
Rentix’s process to keep you compliant and friction-free
Rentix Property Management has already built AB 414 compliance into its systems. Our leases include electronic-refund clauses, our move-out workflows confirm tenant routing and delivery preferences, and our accounting team issues all deposit statements within the statutory 21-day window. Every refund and deduction is backed by receipts, photos, and timestamps, creating an airtight paper trail for property owners.
Frequently asked questions
Does AB 414 change the 21-day deadline?
No, the deadline stays the same.
If the tenant paid rent by ACH, do I have to refund by ACH?
Yes, unless you have a written agreement for another method.
Can I email the itemized statement?
Yes, if that method was designated.
What if there are multiple roommates?
Get a written designation naming one payee or a signed split instruction.
Does AB 414 change what I can deduct?
No, deductions are unchanged. Just document everything thoroughly.
Owner action plan before January 1, 2026
Insert the new clause into every lease, collect updated banking and contact designations, configure your software for electronic refunds, and train staff to meet the 21-day compliance rule. Conduct an internal audit on recent move-outs to ensure your documentation would hold up in court.
Rentix can help implement these updates across your portfolio and monitor every move-out to guarantee timely, compliant electronic refunds with full transparency.
Key sources and further reading
- California Senate Judiciary Committee analysis of AB 414 (June 24, 2025)
- Governor’s press release summarizing the 2025 consumer and housing bill package
- California Apartment Association and AAGLA legislative summaries
- LegiScan bill text for AB 414 amending Civil Code §1950.5