Michigan’s security deposit law gives landlords the clarity they need to avoid issues like unclear charges or missed return deadlines. A firm grasp of these rules supports smoother rental operations and fewer disputes.
In this guide, you’ll learn everything you need to know regarding these regulations, including maximum amounts landlords can request, how to store them, whether landlords must pay interest, legal reasons to deduct, returning deposits, handling disputes, and more.
Statutes Regulating Michigan Security Deposits
Michigan’s security deposit laws appear in Sections 554.601 through 554.616 of the Michigan Compiled Laws, which outline deposit limits, storage rules, required notices, permitted deductions, and timelines for returning funds.
Maximum Security Deposit Amounts Under Michigan Law
Michigan law permits landlords to collect a security deposit up to 1.5 months’ rent. This limit remains the same for every rental agreement, regardless of lease type, contract length, or other factors. Landlords can use this consistent cap to set clear expectations with incoming tenants.
Michigan does not offer exceptions that raise the 1.5 months’ rent maximum for security deposits.
Security Deposit Storage Regulations
Michigan law requires landlords to place every security deposit in a regulated financial institution or secure it with an approved surety bond. Landlords must also give tenants written notice of the institution’s name and address so that both sides know exactly where the funds are held during the tenancy.
A landlord cannot keep a tenant’s security deposit in an unregulated account or hold the funds in a personal cash drawer rather than at a qualifying financial institution or an approved bond arrangement.
Security Deposit Interest in Michigan
Michigan does not require landlords to place security deposits in interest-bearing accounts, and landlords do not need to pay tenants any interest on those funds.
Making Security Deposit Deductions
Security deposit deductions give landlords a reliable way to protect the condition of a rental property. Tenants sometimes cause damage beyond normal wear and tear, and landlords use deposit funds to complete repairs and return the unit to its previous condition before listing it again.
When Landlords Can Deduct
Michigan landlords can draw from a tenant’s security deposit for the following reasons:
- Damage that exceeds normal wear and tear and requires repair
- Unpaid rent that remains outstanding at the end of the tenancy
- Cleaning costs needed to return the unit to its move-in condition
- Replacement of missing items listed on the move-in inventory checklist
- Unpaid utility bills the tenant must cover under the lease
When Landlords Can’t Deduct
Michigan landlords cannot draw from a tenant’s security deposit for the following reasons:
- Routine cleaning that reflects everyday use during a typical tenancy
- Minor cosmetic marks that come from everyday living activities
- Deterioration from aging systems or fixtures already due for replacement
- Damage that results from a landlord’s failure to maintain the property
- Costs unrelated to the tenant’s conduct or responsibilities under the lease
Necessary Documentation to Accompany Deductions
Michigan law requires landlords to give tenants a written, itemized list of damages when making any security deposit deductions. This list must outline each claimed damage and include the estimated repair cost or other basis for the charge. Landlords do not need to attach receipts or invoices, but they must clearly document the deductions.
What to Do When Deductions are Greater Than the Deposit
Tenants sometimes leave damage that costs more to repair than the security deposit covers. When this happens, Michigan landlords should document the unit’s condition, obtain repair estimates or costs, and request payment from the former tenant for the remaining balance. Michigan law does not set a specific timeframe for collecting these additional funds.
Landlords who cannot collect the outstanding amount can file a claim with their local Michigan small claims court.
Returning Security Deposits to Tenants
Michigan law sets clear rules for how landlords must return any remaining portion of a tenant’s security deposit after all eligible deductions have been made.
Required Timeline for Return
Michigan landlords must mail an itemized list of damages and any remaining refund within 30 days after the tenant moves out. The 30-day period begins on the day the tenant vacates the unit. After receiving the itemized list, the tenant has 7 days to dispute the charges in writing.
Method for Return
Michigan landlords must send the refund by mail to the tenant’s last known address or to the forwarding address (which the tenant must provide within 4 days of moving out). Landlords may use a check or another verifiable payment method. When withholding any portion of the deposit, landlords must include an itemized list of deductions with the notice.
Penalties for Late Return
Michigan landlords who miss the 30-day deadline or fail to provide the required itemized list lose the right to keep any part of the deposit. Courts may also order landlords to pay the tenant up to twice the amount wrongfully withheld if they fail to comply with the statutory requirements.
Security Deposit Disputes
Tenants who disagree with how a landlord handles their security deposit hold the right to raise a dispute. They usually do this by sending a written objection within 7 days of receiving the itemized deductions, which gives them a direct way to challenge any charges.
As a landlord, prepare for security deposit disputes by using move-in and move-out checklist forms, staying organized with accounting and bookkeeping, and including clear terms within the lease agreement. Thorough documentation, strong familiarity with Michigan laws, and strict attention to timelines help landlords manage disputes confidently.
Using Condition Reports to Document Damage
Michigan landlords who manage security deposits should use digital condition reports to create a clear record of the unit’s condition. Doing so will make life easier by reducing disputes and supporting accurate deductions when damage occurs.
Landlords can use property management software to create digital reports with photos and videos from their smartphones. Documenting a property’s condition before move-in and after move-out gives landlords the solid evidence they need to make accurate, non-negotiable security deposit deductions.
Sign up for a free TurboTenant account to simplify documentation and strengthen every step of the move-in and move-out process.
FAQs: Michigan Security Deposit Law
Can a landlord deduct painting from a security deposit in Michigan?
A Michigan landlord may deduct painting costs only when a tenant causes damage that goes beyond normal wear and tear. Routine repainting that comes with the regular turnover process stays the landlord’s responsibility and does not qualify as a deductible charge.
Are nail holes considered normal wear and tear in Michigan?
Small nail holes usually count as normal wear and tear in Michigan, so landlords cannot deduct for them. Larger holes, wall anchors, or any damage that requires more extensive patching or repainting may qualify as deductible damage.
Who has to pay for carpet cleaning in Michigan, the landlord or the tenant?
A Michigan landlord may charge a tenant for carpet cleaning only when the tenant leaves stains, excessive dirt, or other damage that exceeds normal wear and tear. Routine carpet cleaning tied to regular turnover stays the landlord’s responsibility and cannot be deducted from the deposit.
What happens if a landlord doesn’t return a security deposit within 30 days in Michigan?
If a Michigan landlord misses the 30-day deadline to return the deposit or provide an itemized list of deductions, they lose the right to withhold any portion of the deposit. A court may also require the landlord to pay up to double the amount wrongfully withheld.
