Michigan Security Deposit Collections & Holdings

Michigan Security Deposit Collections & Holdings

Last Updated: January 6, 2023 by Ashley Porter

Quick Facts Answer
Maximum / Limit 1½ Months’ Rent
Receipt Requirement None
Inventory Requirement Required
Interest Requirement None

To learn about laws on security deposit returns in Michigan, click here.

Maximum Security Deposit Allowed in Michigan

Michigan law limits the maximum security deposit to one and one-half month’s rent.

Can Landlords Charge an Additional Pet Deposit in Michigan?

In Michigan, landlords can charge a pet deposit, except for service dogs and emotional support animals. However, the total security deposit cannot exceed one and one-half month’s rent. Landlords cannot exceed the limit by giving them another name like “pet deposit” or “damage deposit”.

This law does not prevent landlords from adding a monthly pet premium.

How Much Rent Can a Landlord Collect Upfront in Michigan?

In Michigan, if rent is collected in advance beyond the first full rental period (i.e. the time between payments), it is considered part of the security deposit, which is limited to one and one-half month’s rent.

Security Deposit Collections in Michigan

When collecting a security deposit, landlords in Michigan must provide the tenant with two copies of a blank inventory checklist to document the condition of the rental unit. Landlords must also provide a written notice to the tenant including:

  • The name and address of the landlord
  • The name and address of the financial institution or if there is a bond
  • The following statement (word-for-word) in 12-point boldface type which is at least 4 points larger than the body of the notice or 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.

Do Landlords Have to Provide a Receipt for the Security Deposit in Michigan?

While landlords in Michigan must provide a written notice to tenants containing information such as where the security deposit will be held, an additional receipt of the deposit is not required to be provided.

What Obligations Do Landlords Have to Establish the Condition at Move-in in Michigan?

When collecting a security deposit, landlords in Michigan must provide the tenant with two copies of a blank inventory checklist  that lists all items in the rental unit (e.g. carpeting, oven, walls, doors, etc.). The tenant should describe the conditions of each item and return one copy to the landlord within seven days of obtaining the keys.

The landlord and tenant may agree to a different time period to return the inventory checklist. The inventory checklist must include the following statement in 12-point boldface type at the top of the first 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.

Security Deposit Holdings in Michigan

Landlords in Michigan must hold security deposits in one of two places: a regulated financial institution or by posting a cash or surety bond.

Option 1: Regulated Financial Institution. The landlord may hold the security deposit in an account of a regulated financial institution. The money must be reserved for the tenant and not used by the landlord.

Option 2: Cash or Surety Bond. The landlord may post a cash or surety bond with the Secretary of State. The company must be licensed in the State of Michigan. The bond must be in the total amount of all security deposits held by the landlord. However, if the landlord holds more than $50,000 in security deposits, only 25% of the amount over $50,000 needs to be posted as a bond.

Example

If 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 (25% of the $10,000 in excess of $50,000).

If the landlord posts a cash or surety bond, they may use the security deposit during the lease term as long as the security deposit is properly returned.

Are Tenants Entitled to Interest on Their Security Deposit in Michigan?

Michigan law does not require landlords to provide interest on held security deposits. If the security deposit is placed in an account that gains interest, it belongs to the landlord unless stated otherwise in the lease agreement.

How Are Security Deposits Accounted for in Michigan?

Security deposits are not considered taxable income when they are collected.

What Happens to a Security Deposit When the Property is Sold in Michigan?

When a property is sold in Michigan, the landlord in possession of the security deposit is liable until one of the following occurs:

  • The security deposit is transferred to the successor and the tenant is notified by mail of the successor’s name and address
  • The successor places the security deposit into a regulated financial institution or posts a cash or surety bond
  • The security deposit is returned to the tenant

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