(Almost) Everything You Need to Know About Residential Security Deposits in Michigan

(Almost) Everything You Need to Know About Residential Security Deposits in Michigan

by | Mar 19, 2021 | Firm News |

Whether you are a landlord or a tenant, it is important that you know your rights and responsibilities when it comes to security deposits. There are specific things that a landlord must do in order to take a security deposit from a tenant and to keep security deposit funds after a tenant moves out. There are also things that a tenant must do in order to get their security deposit back at the end of their lease. In Michigan, security deposits are governed by The Landlord and Tenant Relationships Act (the “Act”), MCL 554.601 et seq.

Landlord Rights and Responsibilities

In Michigan, if you are a landlord and want to make your tenant pay a security deposit, there are certain requirements you need to fulfill at the beginning of the tenancy. These requirements apply whether you are providing a tenant with a written lease or not.

    • Amount of security deposit may not exceed 1 ½ months’ rent. MCL 554.602.
    • The security deposit must be deposited in a regulated financial institution and landlords cannot use any of the security deposit funds during the tenancy unless they deposit a cash bond or surety bond with the secretary of state. MCL 554.604.
    • Provide and use inventory checklists at the beginning and end of the tenancy. MCL 554.608. The checklist used at the beginning of the tenancy must state in 12-point bold fact 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.”
    • 14 days after the tenant takes possession, landlords must give written notice of:
      • the address where the landlord will receive communications under the Act;
      • the address of the financial institution where the security deposit is being held or the name and address of the bonding company if the landlord has posted a surety bond; and
      • the tenant’s obligation to provide the landlord, in writing, a forwarding address to the landlord within 4 days after termination of occupancy, by using the following statement 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.” MCL 554.603.

The landlord also has certain responsibilities at the end of a tenancy that must be fulfilled in order to keep a portion or all of the security deposit funds. A landlord can only keep security deposit funds at the end of the tenancy for three reasons: 1) actual damages to the rental unit that are above and beyond normal wear and tear (cleaning is not considered damage); 2) rent arrearages or rent due for the premature termination of a rental agreement; or 3) to pay utility bills that the tenant was supposed to pay but did not. MCL 554.607.

The steps that a landlord must take to keep all or part of a tenant’s security deposit at the end of a tenancy are:

    • Complete a termination inventory checklist, listing all of the damages they claim the tenant caused. MCL 554.608.
    • Within 30 days of the tenant ending occupancy, mail to the tenant an itemized list of damages it claims against the deposit. MCL 559.609. A landlord does not have to mail an itemized list of damages if the tenant did not give written notice of a forwarding address to the landlord within 4 days of the tenant moving out. The itemized list of damages must include in 12-point boldface type which shall be at least 4 points larger than the body 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 the landlord is returning a portion of the security deposit, the itemized list of damages must be sent along with a check or money order for the difference between the damages claimed and the remaining amount of security deposit funds. MCL 559.609.
    • If no response to the itemized list of damages is received from the tenant within 7 days after the tenant received the list (not 7 days after it was mailed), the landlord may keep all or the portion of the security deposit that the landlord claimed they were entitled to. MCL 554.613(1)(b).
    • If the tenant responds and disagrees with the landlord, the landlord cannot keep any of the security deposit (for damage to the unit) unless they take the tenant to court and get a money judgement. MCL 554.613(1). The lawsuit must be filed within 45 days after “the termination of occupancy” regardless of when the lease actually expired. Id.

Landlords beware. Not complying with the Act can lead to serious penalties. If the landlord fails to file a suit within 45 days of the date the tenant moves out, they must return the balance of the security deposit to the tenant or they have to pay the tenant twice the amount of the security deposit that they kept. MCL 554.613(2). A landlord may still sue the tenant for damages, but cannot keep the security deposit.

Tenant Rights and Responsibilities

As a tenant, you should know when a landlord can make you pay a security deposit and how much the landlord is allowed to charge you. See above for that information. Make sure you ask for a move-in inventory checklist, if one is not provided. Even if one is provided, it is a good idea to take photos/videos of the rental unit before you move anything into it. It is also a good idea to take photos/videos when you move out.

At the end of your tenancy you need to do/be aware of the following:

    • Within 4 days of moving out, provide your landlord with written notice of a forwarding address where the refunded security deposit can be sent. MCL 554.611. If you do not do this, the landlord does not have to send you any notice of damages or sue you before keeping your security deposit. MCL 554.613(1)(a).
    • The landlord has 30 days to provide you with written notice of any damages to the rental unit if they want to retain all or a portion of your security deposit. MCL 554.609.
      • If you receive a notice of damages and disagree with it, you have 7 days from receipt of the notice to notify your landlord in writing why you disagree. MCL 554.609. If you do not do this, the landlord does not have to sue you before they keep your security deposit. MCL 554.613(1)(a). The law assumes you agreed with the landlord’s findings.
      • If the landlord does not provide you with notice of damages within 30 days or send you your full security deposit, you can sue the landlord for double the amount of the security deposit (but only if you provided proper notice of your forwarding address). Note that if your landlord retains your security deposit for unpaid rent only, your landlord does not have to send you notice that they are keeping the security deposit. They only have to send you this notice for damages they claim you caused to the rental unit.

The above is by no means a full treatise on landlord and tenant rights and obligations under the Act. When a security deposit may be taken or retained can be complex. If you are a landlord or tenant and have questions regarding security deposits or if you believe you need to start a lawsuit regarding either retaining a security deposit (if you are a landlord) or getting your security deposit back (if you are a tenant), we encourage you to contact us. Call 248-349-6203 or send us an email below to make an appointment.

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