The state of Michigan has certain laws which govern residential security deposits. As a landlord in the state, it is essential that you understand these laws to protect your investment. Keep in mind you must also check with your local municipality to determine if there are additional rules which may apply in your town or county.
Is There a Security Deposit Limit in Michigan?
Yes. In the state of Michigan, a landlord can charge a tenant a maximum of one and a half month’s rent as a security deposit.
How Must You Store the Security Deposit in Michigan?
In the state of Michigan, a landlord has two options for storing a tenant’s security deposit.
- Escrow Account- the landlord can place a tenant’s security deposit in an account in a regulated bank or financial institution.
- Surety Bond- a landlord can post a cash bond or a surety bond for the amount of the security deposit. This surety bond must be written by a surety company which is licensed to do business in the state of Michigan. This bond must be deposited with the secretary of state and must be approved by the attorney general. If a landlord does post this type of bond, the landlord is then free to use the tenant’s security deposit money as his or her own.
Is Written Notice Required After Receipt of the Security Deposit in Michigan?
Yes. A landlord must provide the tenant with written notice and with an inventory checklist.Written Notice:
This written notice must be given within 14 days of tenant move-in and must include:
- The landlord’s name.
- The landlord’s address.
- The name of the bank, financial institution or surety where the security deposit is being held.
- The address of the bank, financial institution or surety where the security deposit is being held.
- The following statement, which details a tenant’s obligation to provide the landlord with the tenant’s forwarding address within four days of the tenant’s move out. This statement must be written in 12 point boldface type, which must be 4 points larger than the rest of the notice.
“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.”
If a landlord does not provide a tenant with this written notice, a tenant is not legally bound to provide the landlord with their forwarding address.Inventory Checklist:
When a tenant moves into a unit, the landlord must provide them with two copies of an inventory checklist. This checklist must list all items in the unit including appliances, windows, carpet etc. The tenant must review the checklist, make note of the condition of the property and return one copy of the checklist to the landlord within seven days of move-in.
The checklist must contain the following statement written 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.”
What Are Some Reasons You Can Keep a Tenant’s Security Deposit in Michigan?
In the state of Michigan, you may be able to keep all or a portion of a tenant’s security deposit for the following reasons:
- Unpaid rent
- Unpaid utility bills
- Damage in excess of normal wear and tear
- Breach of lease
Is a Walk Through Inspection Required in Michigan?
Yes. At tenant move-out, the landlord must complete a termination inventory checklist and make note of any damage to the unit.
When Must You Return a Tenant’s Security Deposit in Michigan?
In the state of Michigan, a landlord has 30 days from tenant move-out to return the tenant’s security deposit* to the forwarding address provided**. If the landlord has made any deduction from the security deposit, the landlord must include an itemized list of such deductions along with the amount withheld or approximate cost to repair. The landlord must include a check or money order for the difference between the tenant’s original security deposit and any deductions made.
This itemized list must include the following statement written in 12 point boldface type, and must be at least 4 points larger than the rest of the notice:
“You must respond to this notice by mail within 7 days after receipt of same, otherwise you will forfeit the amount claimed for damages.”
*(If a landlord does not provide the tenant with this notice within 30 days, the landlord forfeits their right to keep any of the tenant’s security deposit.)
**(If the tenant has not provided the landlord with a forwarding address within four days of move-out (see exception under “written notice” above), the landlord is exempt from having to provide a notice of damages, but not from having to return the tenant’s portion of the security deposit.)Tenant Response:
The tenant has seven days to respond to this notice indicating their agreement or spelling out their disagreement with the charges.
If the tenant disputes the amount of deposit kept for damages and the landlord and tenant cannot reach an agreement, the landlord must initiate a lawsuit in court within 45 days of tenant move-out in order to retain the portion of the security deposit they have kept. Failure of the landlord to file a suit when there is a dispute may result in the landlord owing the tenant two times the security deposit.
What Happens to the Security Deposit If You Sell Your Property?
Upon sale or other transfer of property, the landlord must transfer all security deposits to the new owner and notify all tenant’s in writing of the transfer along with the name and address of the new owner.
What is Michigan's Security Deposit Law?
For the actual text of Michigan’s security deposit law, please refer to Michigan Compiled Laws §§554.601-616.