Michigan Security Deposit Law

Maximum Security Deposit Amount

Maximum amount: Michigan landlords can collect up to 1.5 times the monthly rent for security deposits, and cannot exceed that amount. This rule applies regardless of property type, whether or not the unit is furnished, or the length of the lease.

Pet deposits: Landlords can collect a security deposit for pets in Michigan, but that amount must be included in the 1.5-times limit for the regular security deposit. Ultimately, the combined total of the pet and security deposits cannot exceed 1.5 times the monthly rent. Additionally, landlords cannot charge a pet deposit for service animals or emotional support animals (ESAs).

Penalties: While no law specifically outlines the penalty for charging a higher security deposit than 1.5 times the monthly rent, previous cases in Michigan have ordered the landlord to return the excess amount and forfeit their right to withhold funds when the tenancy ends.

Handling Damage Deposits

Properly handling damage deposits is a necessary part of being a landlord. The Michigan security deposit laws outline some important details you should know.

Security deposit storage: Michigan landlords must store security deposits in a regulated financial institution. They can deposit the funds in their personal account if they post a surety bond for the deposit amount. Otherwise, landlords should store the funds in a separate account.

Interest-bearing account: Michigan landlords are not required to accrue or pay interest on security deposits.

Receipt: Landlords in Michigan must provide the tenant with a receipt after receiving the security deposit. The receipt should list the landlord’s name and address, the name and address of the financial institution holding the deposit, and a statement requiring the tenant to provide the landlord with a forwarding address within 4 days of moving out.

Documentation: If collecting a security deposit, Michigan landlords must provide tenants with two copies of a move-in checklist that documents the property’s condition when the tenancy begins. Tenants and landlords should review the document when completed, noting that the tenant should return it in the same condition. The landlord has 7 days to provide the checklist to the tenant after move-in.

Ownership transfer: If the landlord sells the property during a tenancy, they must transfer the deposit to the new owner. Landlords must notify tenants in writing of the change, and the new owner assumes all responsibility for properly handling and returning the funds.

Deductions

At the end of the tenancy, and after reviewing the move-in checklist, Michigan security deposit law allows the landlord to deduct funds from the security deposit for legally allowable reasons. Reasons include repairs for issues beyond normal wear-and-tear, unpaid rent, and some other reasons stated below.

Failure to abide by Michigan law could result in severe penalties for the landlord.

Landlords can deduct for:

Damage beyond normal wear and tear. Physical damage to the property caused by negligence, abuse, or unauthorized changes to the unit does not count as “wear and tear,” and landlords can use the security deposit for these repairs. Damages exceeding normal wear and tear include large holes in the walls, ceilings, or floor, broken doors and windows, burned, torn, or stained carpet, damaged or missing appliances, and unauthorized painting. Photos should document damage to accompany the move-in / move-out checklist.

Excessive cleaning. Landlords can expect light cleaning after a tenant moves out, which cannot be the source of a deduction. However, landlords can use damage deposits to cover excessive cleaning needs. Examples include trash or furniture left behind by the tenant, excessive grease or stained surfaces, and strong odors from neglect or pet damage.

Unpaid rent. If the tenant leaves without making all their required rent payments (including the last month’s rent), the landlord can deduct funds from the deposit to cover the debt. If the tenant abandons the lease early, they are still responsible for the rent remaining on the lease term until the landlord finds a new tenant. TurboTenant makes collecting rent online easy and tracks each tenant’s payment status easily.

Unpaid utility bills. If the lease agreement requires the tenant to pay the landlord for utilities, unpaid utility charges can be deducted from the security deposit when the tenancy ends. The lease agreement must clearly state this requirement for the deduction to hold water.

Smoking-related damage. If the lease prohibits smoking, the landlord can use funds from the damage deposit to clean nicotine stains on the walls or ceilings, remove smoke and odors, or replace smoke-damaged carpets, blinds, or curtains.

Landlords cannot deduct for:

Normal wear and tear. Even when a tenant lives in the unit normally and responsibly, wear and tear is inevitable. Scuffed baseboards or marks on walls, faded paint and wallpaper, worn carpet, loose doorknobs, and nail holes are all considered normal wear and tear, and landlords cannot deduct funds from the deposit to remedy them.

Routine maintenance or property improvements. If the landlord intends to improve the property after the tenant has moved out or schedules routine maintenance during the vacancy, the landlord must use their own money, not security deposit funds.

Damage caused by weather or natural disasters. Landlords cannot deduct damage to the property caused by high winds, excessive rain or snow, or other natural phenomena from the deposit.

Costs not included in the lease. If a cost crops up that is not included in Michigan security deposit law or explicitly mentioned in the lease, landlords may be unable to cover it with funds from the deposit. Confirm with local laws and guidelines before making any additional deductions.

Return Timeline

At the end of a tenancy, the landlord must make the necessary deductions and return the funds to the tenant.

Timeframe: Michigan security deposit law requires landlords to send the deposit back to the tenant within 30 days, even if they make deductions from the funds. If making deductions, the landlord must also include language in the notice that states, “You must respond to this notice by mail within 7 days after receipt of same; otherwise, you will forfeit the amount claimed for damages.”

Deduction tracking: If making security deposit deductions, the landlord must include an itemized list of the deductions. The itemized list should include:

• A line-by-line description of each deduction and charge
• An explanation of each deduction
• Any available copies of receipts for the work done, repair estimates, or invoices from vendors

Itemized deduction notification: The notification of the deductions, along with the remainder of the security deposit funds, should be delivered to the forwarding address provided to the landlord by the tenant within 30 days. While not required, it’s best practice to send the information by Certified Mail or another trackable method to establish a paper trail in case of disputes. The remainder of the funds should be sent by direct deposit or check. While cash is allowed, keeping track of cash in transit is more challenging and should generally be avoided.

Penalties: If the landlord does not follow Michigan security deposit laws, they could forfeit their right to withhold funds for repairs. Tenants can also sue them for up to twice the security deposit amount.

Handling Disputes

While you hope to avoid them, disputes may arise after the tenant moves out. Maintaining good communication and documenting every issue is a great way to protect yourself if a problem crosses your desk.

Move-in/move-out checklist: As explained above, move-in checklists are a great way to establish a baseline for the property’s condition and can be used to compare the unit’s state at the beginning and end of a tenancy. Michigan law requires the landlord and tenant to complete a checklist at the time of move-in, and it’s a good practice to add photos to complement the text descriptions.

Michigan law also requires the checklist to display the following language:

“You should complete this checklist, noting the condition of the rental property, and return it to the landlord within 7 days after obtaining possession of the rental unit. You are also entitled to request and receive a copy of the last termination inventory checklist, showing what claims were chargeable to the previous tenants.”

Additionally, the checklist must also have the following language about the refund and security deposit return:

“You must notify your landlord in writing within 4 days after you move of a forwarding address where you can be reached and where you will receive mail; otherwise your landlord shall be relieved of sending you an itemized list of damages and the penalties adherent to that failure.”

Tenant challenge: If a tenant challenges any aspect of the withholdings, communicate clearly and in writing. You can use the photos and move-in checklist to explain your side of the story and promptly respond to any claims the tenant might bring up. Negotiating a settlement with the tenant in certain instances might be easier, so review your documentation and the law when deciding on any course of action.