Michigan Security Deposit Laws

Guide to Michigan Security Deposit Law

Here is the landlord’s guide to Michigan security deposit law.

1. Michigan Security Deposit Limit

Most states limit how much a landlord can charge a renter for a security deposit. In Michigan, landlords may not collect a security deposit that exceeds one and one-half months’ rent. For example, if monthly rent is $1,500, the maximum security deposit that can be collected is $2,250.

Unlike some states that establish different limits for furnished and unfurnished rentals, Michigan applies the same limit regardless of the property’s furnishings. Landlords should verify that the deposit amount complies with state law before signing a lease agreement.

Collecting a deposit above the legal limit can expose a landlord to unnecessary disputes and potential legal challenges.

2. Nonrefundable Fees

Michigan law does not generally permit landlords to treat a security deposit as nonrefundable.

Any amount collected as a security deposit is subject to Michigan’s security deposit regulations and must be handled according to state requirements. Landlords may charge separate fees if they are clearly outlined in the lease agreement and permitted under applicable law.

Clear lease language is important whenever fees are charged. Property owners should distinguish security deposits from other charges and ensure tenants understand the purpose of each fee.

3. Storing a Tenant’s Deposit in Michigan

Some states have rules regarding how landlords should keep a tenant’s deposit. In Michigan, landlords must either place security deposits in a regulated financial institution or provide a surety bond covering the amount of deposits held.

The financial institution must be regulated by a state or federal agency. If a landlord chooses the surety bond option, the bond must be posted with the Secretary of State and meet statutory requirements.

Proper handling of deposits demonstrates compliance and helps reduce potential disagreements regarding the location and security of tenant funds.

4. Written Notice After Security Deposit Receipt

Landlords are required by Michigan law to provide written notice to tenants regarding receipt of their security deposit.

Within 14 days after a tenant takes possession of the rental property, the landlord must provide a notice containing specific information, including:

• The name and address of the financial institution holding the deposit
• The landlord’s name and mailing address
• Information explaining the tenant’s obligation to provide a forwarding address after move-out

This notice is an important part of Michigan’s security deposit process. Maintaining records showing when the notice was delivered can help landlords document compliance if questions arise later.

5. Reasons to Withhold a Tenant’s Security Deposit in Michigan

Under certain conditions, landlords can keep all or a portion of a tenant’s security deposit. In Michigan, common reasons include:

• Unpaid rent
• Damage beyond normal wear and tear
• Unpaid utility bills that are the tenant’s responsibility
• Costs resulting from a tenant’s breach of the lease agreement

For example, if a tenant vacates the property owing rent or leaves significant damage that requires repair, the landlord may deduct those expenses from the deposit.

Although, in accordance with Michigan’s renter protections concerning security deposits, the landlord cannot keep the deposit to cover conditions that existed before the tenant moved into the unit.

Likewise, ordinary wear resulting from normal occupancy generally cannot be charged against the deposit. Proper documentation, photographs, invoices, and inspection records can help support legitimate deductions.

6. A Walk-Through Inspection

Michigan law places significant importance on documenting a property’s condition at move-in.

Landlords must provide tenants with an inventory checklist at the beginning of the tenancy. The checklist allows both parties to record the condition of the rental unit and identify any existing defects or damage.

The tenant has seven days after moving into the property to review the checklist, note any disagreements, and return it to the landlord.

Michigan law does not require a formal move-out walk-through inspection with a specified advance notice period. However, conducting inspections before move-in and after move-out remains a practical way to document the property’s condition and support any security deposit deductions.

Detailed records often help reduce disputes and provide evidence if disagreements occur.

7. Security Deposit Refund in Michigan

Once the tenant vacates the property, Michigan landlords generally have 30 days to return all or part of the tenant’s deposit.

If deductions are made, landlord-tenant law states the landlord must provide an itemized list explaining the reasons for each deduction. The itemization should clearly identify damages, unpaid rent, or other allowable charges and include the amount deducted for each item.

The itemized statement and any remaining deposit must be mailed to the tenant’s forwarding address within the required timeframe.

Michigan tenants are required to provide a forwarding address within four days after moving out. This requirement plays an important role in the security deposit return process. Failure to follow Michigan’s refund procedures can limit a landlord’s ability to retain deposit funds and may result in additional liability.

8. Change in Property Ownership

When ownership of a rental property changes, Michigan law requires proper handling of tenant security deposits.

The outgoing landlord has two options in this regard:

One, to return the deposit amount, less any lawful deductions, back to the renter.

And two, to transfer the deposit to the new owner.

According to Michigan deposit law, when the deposit is transferred, the outgoing landlord must notify the tenant of the transfer. The new owner then becomes responsible for holding and returning the deposit according to Michigan law.

Accurate records during ownership transitions help protect all parties and ensure continuity of compliance obligations.

Bottom Line

Michigan security deposit laws establish clear requirements regarding deposit limits, storage methods, required disclosures, inventory checklists, allowable deductions, and refund timelines. Landlords who understand these rules are better positioned to protect their properties, reduce disputes, and maintain compliance throughout the rental process. 

If you have specific questions, hire the services of a qualified Michigan attorney. Alternatively, you can seek help from a knowledgeable property management company. Real Property Management Partners assists landlords throughout Michigan with lease administration, tenant communication, property inspections, documentation, and regulatory compliance. 

Our team helps property owners implement consistent management practices that reduce risk and support long-term property performance. Contact Real Property Management Partners today to learn how our professional property management services can support your rental property goals.