What Property Managers Need to Know About California Assembly Bill 414 and the Shift to Electronic Security Deposit Refunds

As of January 1, 2026, California will require electronic security deposit refunds under certain conditions. In this article, learn everything you need to know about Assembly Bill 414.

California is continuing to modernize landlord-tenant laws, and security deposit refunds are no exception. California Assembly Bill 414 (AB 414), passed in October 2025, updates how refunds must be paid out from the property when resident payments and deposits were made electronically. Starting in 2026, California property managers who accept digital payments from residents may need to provide electronic security deposit refunds given certain conditions are met. Understanding these changes now can help teams stay compliant through the transition and create a smoother move-out experience for both onsite staff and residents.

What Is California Assembly Bill 414?

AB 414 amends California Civil Code §1950.5 to update how residential security deposits are returned. Signed into law in October 2025 and effective January 1, 2026, the bill aligns refund rules with modern payment methods.

As stated in California AB 414:

“If the landlord received the security or rental payments from the tenant electronically, the bill would instead require the landlord to return the remainder of the security electronically, as specified, unless the landlord and tenant designated another method of return, by written agreement.”

In short, this means that property teams are required to return a deposit electronically when the resident’s initial deposit was made electronically unless both parties agree in writing to the refund being made by another method.

How Does Assembly Bill 414 Change Security Deposit Refund Requirements in CA?

While the 21-day return deadline and allowed deductions stay the same, refund methods and delivery rules now encourage electronic security deposit refunds in California. Read below for a clear breakdown on how the bill may impact your security deposit refund processes.

#1: Electronic refunds become the default when payments were made electronically

Unless otherwise agreed to in writing, if rent or the original security deposit was accepted electronically, the refund must also be issued electronically. This includes direct deposit or other electronic payment methods available to the property manager. Paper checks are still allowed, but only if both parties agree in writing. Verbal agreements are not sufficient.

#2: Written notice of electronic refund rights is required

If electronic payments were used for a security deposit or rent, property managers must notify residents in writing of their right to receive an electronic refund. This added step helps ensure transparency and compliance with the rollout of AB 414. The bill also allows itemized deduction statements to be sent by email if the resident provides written consent. Without consent, statements must still be delivered in person or by first-class mail.

#3: Multi-resident refunds are made in one payment unless residents agree in writing

When multiple adult residents are on the lease, the remaining deposit must be returned as one payment “made payable to all adult tenants on the rental or lease agreement”, according to AB 414. If residents want the refund split, sent to one person, or delivered electronically to multiple accounts, all residents must agree in writing.

What hasn’t changed

AB 414 does not change:

• The 21-day California deadline to return the deposit
• What deductions are allowed
• The ability to payout via paper method when electronic payments were never accepted

FAQ’s for Property Managers on Electronic Security Deposits in California

When does California’s Assembly Bill 414 go into effect?

AB 414 takes effect on January 1, 2026. The updated rules apply to any tenancy that ends on or after that date.

Are property managers required to offer electronic security deposit refunds?

Yes, if rent or the security deposit was paid electronically. In those cases, electronic security deposit refunds are required unless both parties agree in writing to another method.

What qualifies as an electronic security deposit refund?

Electronic refunds include direct deposit or any electronic or virtual payment method available to the property manager. The resident must designate the deposit account for the refund or agree to an alternative method in writing.

How does AB 414 affect paper check refunds?

Paper checks are still allowed as a payout method, but they are no longer the default if the resident’s rent payment or security deposit was made electronically. A written agreement is required to issue a check instead of an electronic security deposit refund if rent or the security deposit were paid electronically.

Can residents choose their refund method?

Yes, but the choice must be documented in writing. Property managers must also notify residents of their right to receive an electronic refund when applicable.

How can property managers stay compliant?

Property managers can stay compliant with the rollout of AB 414 by updating lease language, confirming electronic refund capabilities at their properties (if they accept electronic payments) and standardizing written agreements. Clear documentation is especially important to encourage transparency and minimize disputes with residents.

Preparing Your Multifamily Properties for California’s New Electronic Security Deposit Refund Regulation

As California AB 414 goes into effect in 2026, it’s essential for property managers to equip themselves with the right refund processes and support. With Zego’s support, property managers can send fast, secure electronic refunds without relying on paper checks or manual workflows.

Disclaimer: This article is not intended to provide legal advice on complying with this law. Please seek compliance advice from legal counsel.