As California continues modernizing housing laws, a new regulation (Assembly Bill 414) will reshape how landlords handle security deposit refunds.
Beginning January 1, 2026, property owners who manage rent payments electronically must also return deposits electronically. This shift aims to simplify the refund process, reduce paperwork, and bring rental accounting into the digital era.
Before the law goes live, landlords need to review their leases, adjust refund practices, and confirm they can process payments electronically. Here’s what to expect from AB 414 and how to prepare.
Key Takeaways
AB 414 takes effect on January 1, 2026, and updates California Civil Code §1950.5.
Security deposit refunds will default to electronic payments when the tenancy used electronic transactions.
Email delivery of the itemized deduction statement is now permitted with mutual written consent.
Landlords must return deposits for multi-tenant leases in a single check or transfer unless otherwise agreed in writing.
Lease agreements should be updated to reflect these changes before 2026.
Why California Introduced AB 414
For years, California’s Civil Code required security deposits to be refunded by paper check, even if tenants paid electronically. This created delays and unnecessary friction in a digital-first world. AB 414 closes that gap by aligning deposit returns with the electronic nature of most modern rental transactions.
The change benefits both landlords and tenants. Owners save time and reduce mailing costs, while tenants receive refunds faster and with fewer administrative headaches. The goal is to streamline the end-of-tenancy accounting process and establish consistency across the state.
What the Law Requires
1. Electronic Refunds Become the Default
If a landlord received rent or the tenant’s initial deposit electronically (through direct deposit, Zelle, Venmo, or any payment platform), the refund must now be returned electronically to the tenant’s designated account
However, the law allows flexibility. Landlords and tenants can still agree in writing to use a different payment method, such as a paper check. The key is documentation; verbal agreements won’t meet compliance standards.
2. Itemized Statements May Be Sent by Email
Previously, the deduction statement outlining cleaning costs or damages had to be mailed or hand-delivered. Under AB 414, this can be sent via email if both parties sign a written agreement authorizing it
That consent can be given at any point during the tenancy, allowing landlords to update existing leases or include an addendum for current tenants.
3. Clarity for Multi-Tenant Leases
When multiple adults are listed on a lease, landlords must return the entire remaining deposit in a single check or transfer made payable to all tenants
This addition helps landlords avoid conflicts between roommates by making one clear payment. If tenants prefer the refund to go to a single person or account, everyone must agree to it in writing.
How to Stay Compliant Before January 2026
Landlords and property managers across California, especially in cities like Pleasanton, Dublin, and Livermore, should take these steps to ensure compliance ahead of the deadline
Update Your Lease Agreements
Include a clause giving tenants the option to receive their itemized deduction statement by email. This written consent will keep your process compliant and efficient.
Confirm Electronic Payment Systems
Make sure you can send refunds via direct deposit or another electronic method. If you already collect rent online, this adjustment should be minimal.
Standardize Co-Tenant Refund Procedures
For properties with multiple tenants, have a standard policy in place that designates how refunds will be handled. Keep a signed agreement that specifies one shared account or a single payee to avoid confusion.
Why This Matters for Property Owners
AB 414 isn’t just about compliance. It’s about modernization. With more renters paying electronically, landlords need to adapt their administrative systems. Digital refund capability reflects professional management practices and enhances tenant satisfaction.
Moreover, failing to comply after the law takes effect could open the door to disputes or penalties under California’s landlord-tenant regulations. Proactive preparation protects your business and demonstrates that you operate with transparency and efficiency.
Practical Example
Imagine a landlord in Pleasanton who collects rent through an online portal. When a tenant moves out in 2026, the deposit refund must be issued electronically to the tenant’s bank account. If the landlord prefers mailing a check, both sides must sign an agreement specifying that method.
If there are three tenants on the lease, the law requires the refund to be made as one payment payable to all adults unless a written document authorizes another arrangement.
These details might seem small, but they’re critical for maintaining compliance.
Common Questions About AB 414
1. Does this mean I can no longer use checks at all?
No. While electronic refund is the default, landlords and tenants can still agree in writing to use a check or another method. The key requirement is that the agreement must be documented.
2. Can I email the move-out statement without asking the tenant first?
No. The tenant must consent in writing. You can add an email authorization clause in the lease or send a separate agreement anytime during the tenancy.
3. What happens if I have multiple tenants?
You must issue a single refund to all adult tenants unless a written agreement specifies a single payee or account for the return.
4. Will this law apply to all rental types?
Yes. AB 414 applies to residential landlords throughout California, including single-family homes, condos, and multifamily units.
5. What if I only accept paper checks for rent payments?
If you never accepted electronic payments from a tenant, you may continue refunding deposits by check. The electronic refund rule only applies when the tenancy has already been digital.
How Advantage Property Management Services Can Help
Navigating compliance updates can be time-consuming for landlords managing multiple properties. Advantage Property Management Services stays ahead of these legal changes and ensures your leases, documentation, and payment systems meet the latest California standards.
Our team helps you:
Update lease agreements to include proper consent clauses.
Implement secure electronic refund procedures.
Manage multi-tenant deposits accurately.
Communicate legal updates clearly to your tenants.
As AB 414 approaches, this is the perfect time to modernize your processes and protect your investment. Reach out to Advantage Property Management Services today to review your lease agreements and ensure your rental operation is ready for California’s next generation of digital compliance.
Additional Resources
AB 628 Requires California Landlords To Provide a Refrigerator
The Different Types of Eviction Notices and How to Serve Them Correctly in California
