Questions frequently arise with respect to security deposits. "Is there a limit to what can be charged?" "Must the landlord put the money in a trust account?" "What can be deducted at the termination of tenancy?" Etc.

This and the next column will address the most frequently asked questions insofar as they apply to residential tenancies in California. The primary source for information about these and other security deposit issues is sections 1950.5 – 1950.6 of the California Civil Code -- 5.5 single-spaced pages of material that could probably be guaranteed to cure insomnia. California Realtors® can find a readable summary of these laws in a Question-and-Answer memorandum produced by CAR's Member Legal Services Dept.

The maximum amount of security deposit that may be charged is the equivalent of two month's rent for unfurnished units and three month's rent for furnished. A landlord may also collect the first month's rent in advance. So, for example, if an unfurnished unit is rented for $1,200, the most that could be collected up front would be $3,600 ($2,400 as security + $1,200 rent for the first month). The landlord could not charge $3,600 plus, say, an additional $250 pet deposit.

Certain additional charges are allowable at the outset of a tenancy, but the law is very specific about them.

• A landlord may charge a "screening" or "application" fee for actual out-of-pocket costs in obtaining a credit report or other information about an applicant, but the amount of that fee is limited. It can be no more than $30, or $30 plus accumulated yearly adjustments according to the Consumer Price Index since 1998. (No, I'm not going to try to figure it.)

• A landlord can charge an increased deposit up to the equivalent of one-half month's rent if the tenant will use a waterbed or other water-filled furniture.

• A landlord can collect other prepaid rent in addition to the first month's, but only if the amount is no less than six-month's rent for a lease that is six months or longer.

• A landlord may collect a fee for some structural, furnishing, or decorative alteration, but only if, at the tenant's request, the landlord and tenant have entered into a separate agreement regarding such alteration. For example, the tenant may request that the landlord install a new type of door, and may agree to pay for that.

It is against the law for any portion of the security deposit to be characterized as nonrefundable.

Some local jurisdictions have ordinances that require that a security deposit must be placed in an interest-bearing account for the benefit of the tenant. But such regulations are the exception. In general, there are no requirements as to what a landlord may or may not do with security deposit money during the term of the tenancy. Of course, if the money is held by a property manager, then it will be subject to rules governing brokerage trust accounts.

Whether the landlord has put the security deposit money in a savings account or squandered it in Las Vegas, there are very specific requirements as to what must happen when the tenancy comes to an end. In general, they are simply that the deposit money can be used to cover any default in rent, or other default the tenant may have incurred, to restore the unit to its level of cleanliness at the beginning of the tenancy, and to repair any damage beyond ordinary wear and tear. The rest must be returned.

However, there are some rather elaborate procedures spelled out in the law as to the tenant's rights regarding the disposition of the security deposit money. Those will be discussed in the next column.

Published: December 8, 2005

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Bob Hunt is a director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .