Michigan Security Deposit Law

Last Updated: September 23, 2021 by Elizabeth Souza

QUICK FACTS
  • Standard Limit / Maximum Amount: One and one-half 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 one and one-half months’ rent. The landlord shall not require a security deposit unless the tenant is notified no later than 14 days from the date the tenant receives a written statement of the landlord’s name and address for receipt of notice. Along with the name and address of the financial institution or surety.

Additional Pet Deposits. Under Michigan’s law, the landlord may ask for an additional pet deposit; however, people with disabilities who use service animals are entitled to full and equal access to housing. Thus, the tenant may not be discriminated against and the landlord may not require the tenant to pay extra to have a service animal. If the service animal causes damage to the rental unit, the tenant is liable to pay for any damages.

The Federal Fair Housing Act requires housing facilities to allow tenants who use service dogs and emotional support animals to have an equal opportunity to use and enjoy their home.

Security Deposit Holdings in Michigan

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

Surety Bonds in Michigan. The surety bond must be written by a licensed surety company in the state of Michigan and is accepted by the Attorney General to secure a deposit up to $50,000 and 25% of any amount that is greater than $50,000.

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).

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 and unpaid bills; and
  3. 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.

“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 itemized list shall include a check or money order for the remaining funds of the security deposit. The notice of damage must also contain the following text in at 12-point, boldface font that is also at least four points larger 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 of the Tenant to Dispute the Charges in the Notice: The tenant has seven 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. The tenant shall notify the landlord in writing of the tenant’s forwarding address within four days after the end of tenancy, failure to provide the landlord with a forwarding address shall relieve the landlord of delivering the notice of damages.

Failure to Return the Security Deposit on Time: If the landlord fails to return the security deposit and comply with the notice of damages within 30 days, the security deposit shall immediately be paid to the tenant in full.  The landlord’s failure to institute proceedings for retaining the security deposit may be held liable up to double the security deposit as described below.

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

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, 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; and
  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: At the start of the tenancy, the landlord must provide the tenant of two blank copies of the inventory checklist prior to move-in and must deliver one copy thereof to the landlord. At the end of tenancy, the landlord shall complete a termination inventory checklist which will state all new damages. The inventory must be in 12-point, boldface font at the top of the first page stating the following:

“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 inventory shall include the following:

  1. Details of the current condition of the premises;
  2. All items in the rental unit that are owned by the landlord (e.g. carpeting, windows, walls, paint, draperies, doors, shelves, appliances, windows, plumbing and electrical fixtures);
  3. A signature from the tenant and landlord as an agreement to the inventory checklist.

The checklist shall serve as proof of the condition of those items at the start of the lease and at the end of it.

Collecting on the Bond: The tenant may bring a suit in the district 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 previous 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 previous 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 previous 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.