Michigan Security Deposit Law

  • Standard Limit / Maximum Amount: 1 & 1/2 months’ rent (read more)
  • What Can Be Deducted: Cost of repairs, unpaid rent, unpaid bills & payment for early termination of the lease (read more)
  • Time Limit for Return: Within 30 days after the move-out date (read more)
  • Penalty if Not Returned on Time: Double the security deposit (read more)

Purpose. Security deposits are like safety nets. They ensure compensation for any loss that the landlord might incur because of the tenant’s acts. It covers for incidents like damage to the property, termination of the lease without notice or non-payment of rent.

Questions? To chat with a Michigan landlord tenant attorney, Click here

Legal Basics. Michigan landlords can demand a maximum of one and one-half months’ rent as security deposit from which repairs for damage to the unit beyond normal wear and tear, unpaid rent, unpaid bills and rent owed for early termination of the lease may be deducted. It must be returned within 30 days of the tenant’s move-out date. Otherwise, the landlord may be made to pay a penalty of up to double the deposit.

Maximum Security Deposit Charge in Michigan

The maximum amount Michigan landlords can charge as security deposit is 1 1/2 months’ rent.

Security Deposit Holdings in Michigan

Michigan landlords are required to place the security deposit in a regulated financial institution to be held there for the benefit of the tenant. Alternatively, the landlord may post a cash or surety bond with the secretary of state.

One bond may be posted for all the security deposits the landlord is holding. The bond should secure the amount of security deposit up to $50,000 and 25% of the amount in excess of $50,000. So, for example the landlord is holding $60,000 in security deposits, the bond should be for $52,500, which is $50,000 (for the first $50,000) plus $2,500 (for the $10,000 in excess of $50,000).

Written Notice upon Move-In

The landlord is required to give the tenant written notice within 14 days of the latter’s move-in date. The notice shall contain the following:

  1. The name and address to where all communications for the landlord can be sent;
  2. The name and address of the financial institution where the security deposit is being kept or the details of the bond posted; and
  3. Notification to the tenant of the obligation to provide a forwarding address within 4 days after moving out.

The notification to the tenant must contain the text below in 12 point boldface font which is at least 4 points larger than the body of the notice (or lease agreement if it is contained in the lease agreement):

“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.”

Allowable Deductions on Security Deposits in Michigan

Unless a bond has been posted for the security deposit, the landlord can only use the security deposit when the lease or tenancy has ended or has been terminated. Also, the landlord can only use the security deposit to cover:

  1. Cost of repairs for damage to the unit beyond normal wear and tear
  2. Unpaid rent
  3. Unpaid bills
  4. Rent owed for early termination of the lease

Can the deposit be used by the tenant as last month’s rent? Not usually, but it can be done if there is a written agreement between the parties to do so.balance of the deposit claimed by the landlord.

“Normal Wear and Tear” vs. Damage in Michigan

  • Normal wear and tear” refers to the deterioration of the property that happens when the property is used as it was meant to be used and only when that deterioration occurs without negligence, carelessness, accident, misuse, or abuse by the tenant or the people the tenant brings there. They are minor issues that occur naturally like aging and expected decline as a result of everyday living. These can include gently worn carpets, loose door handles, fading wall paint and flooring, stained bath fixtures, lightly scratched glass, dirty grout and mold that occur naturally.
  • Damage,” on the other hand, is deterioration or destruction that is the tenant’s fault, either through deliberate acts or as a result of negligence during the tenancy period. With respect to those chargeable to security deposits in Michigan, it refers to the damage that resulted from non-compliance with any of the tenant’s obligations as such under the law.

Check out our article on wear and tear vs. damage to get a better idea of the difference.

Returning Security Deposits in Michigan

Time Frame: The landlord has 30 days after the tenant moves out to return the security deposit. If there are deductions to the security deposit, the landlord must provide the tenant with a notice of damages containing an itemized list of the deductions and the actual or estimated costs of the same. The notice of damage must also contain the following text in at 12 point boldface font that is also at least 4 points bigger than the rest of the text on the notice:

“You must respond to this notice by mail within 7 days after receipt of the same, otherwise you will forfeit the amount claimed for damages.”

Failure to provide the Notice of Damages: Failure of the landlord to provide the notice of damages as required above will be considered as his agreement that there is no damage for which he can make deductions. This means he forfeits his rights to make deductions and must return the full security deposit.

Failure of the tenant to dispute the charges in the Notice: The tenant has 7 days from receiving the Notice of Damages to dispute the charges contained therein. If the tenant fails to do so, the tenant will be considered to have agreed to them.

Failure to return the security deposit on time: The landlord may be held liable for up to double the security deposit. However, this liability does not automatically attach to the landlord upon failure to return the security deposit on time. It comes from the landlord’s failure to institute proceedings for retaining the security deposit as discussed below.

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Proceedings for Damages and Retention of Security Deposit

If the tenant objects to the landlord’s retention of any part of the security deposit, the landlord must either return the corresponding amount or file an action in court for a money judgment within 45 days of the tenant’s move out date. If the landlord keeps the security deposit despite failure to bring the action or win the same, the landlord may be made liable for double the security deposit. This should include when the landlord keeps all of the security deposit but fails to provide the notice of charges.

Note, however, that the requirement of bringing the action discussed above will not apply if:

  1. The tenant failed to provide a forwarding address
  2. The tenant did not dispute the charges on time
  3. The tenant agreed in writing to the charges
  4. The amount withheld is used entirely to cover unpaid rent

As an exception to the exception, the landlord is still required to bring the action despite the tenant’s failure to provide the forwarding address, if the landlord did not comply with the required Notice upon moving in, which informs the tenant of the latter’s duty to provide the forwarding address.

Additional Rules & Regulations in Michigan

Inventory Checklists: The landlord is required to have an inventory checklist of all the items that belong to the landlord in the rental unit. The checklist will serve as proof of the condition of those items at the start of the lease and at the end of it.

At the start of the tenancy, the landlord must provide the tenant of 2 copies of the checklist prior to the latter’s move-in. The checklists must be identical and contain the following statement in 12 point bold font at the top of the page:

“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 which shows what claims were chargeable to the last prior tenants.”

The tenant must indicate the condition of each of the items on the checklists, sign and deliver one copy thereof to the landlord. At the end of the tenancy, the landlord will do the same. The landlord must inspect and indicate the condition of the premises and the items the landlord owns therein and list all the damage that was caused by the tenant, which may not include the damage that was already there according to the initial checklist.

Collecting on the Bond: The tenant may bring a suit in the district, common pleas or municipal court where the landlord lives or does business to collect on the bond. Technically, the tenant may also do so in small claims court.

No Waivers Allowed: Neither the tenant nor the landlord can waive the notices, rights and obligations discussed above.

New Property Owner’s Responsibility: If the rental unit is sold, the old landlord will remain to be liable for the security deposit until one of the three conditions below happens:

  1. The old landlord transfer’s the security deposit to the new buyer and informs the tenant of the transfer, and the name and address of the new buyer via ordinary mail;
  2. The new buyer places an amount equal to the tenant’s security deposit into a regulated financial institution or issues a bond for the same, as the old landlord was required to do; or
  3. Returns the tenant’s security deposit.

If the landlord opts to transfer the security deposit the tenant to the new owner, the latter inherits the old landlord’s obligation connected thereto.

For additional questions about security deposits in Michigan, please refer to the official state legislation, Michigan Compiled Laws § 554.601 to § 554.616, for more information.