Every tenant wants to get back their entire security deposit, but sometimes that’s not possible, especially if there are damages beyond normal wear and tear. When it comes to dealing with security deposits in Michigan there are a number of specifications that the landlord and the tenant must address. The first of these is the amount of the deposit, which is capped at 1.5 month’s rent per MCL 554.602. A landlord can not ask for more than that amount without running afoul of the law, and when you’re a landlord you always want the law on your side.

A second very important specification for the landlord is that the security deposit must be held in a separate account.

A second very important specification for the landlord is that the security deposit must be held in a separate account. Per MCL 554.604, the landlord must deposit the security deposit in a regulated financial institution. Typically a security deposit must remain in the separate account, untouched by the landlord during the duration of the tenancy. However, in Michigan the landlord may use the security deposit for any purposes if the landlord deposits with the secretary of state a cash bond or surety bond.

Inventory Checklists

It’s always a good idea to document the rental unit’s condition prior to a new tenant moving in. Michigan law requires that landlords provide inventory checklists both at the beginning and the end of the lease agreement, per MCL 554.608. The checklists serve as detail to the condition of the unit. Here are some additional stipulations regarding using inventory checklists in Michigan:

  1. At the beginning of the lease the landlord must provide two blank copies of a beginning inventory checklist to the tenant, which shall be identical to the form used for the termination inventory checklist. The checklist must include all items in the rental unit owned by the landlord including carpeting, draperies, appliances, windows, furniture, walls, closets, shelves, paint, doors, plumbing fixtures and electrical fixtures.
  2. The tenant must review the checklist, note the condition of the property and return one copy of the checklist to the landlord within seven days after receiving possession of the premises. The landlord and tenant can agree to complete their inventory checklist within a shorter period.
  3. The checklist must contain the following notice 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. ”

  4. At the termination of the occupancy, the landlord must complete a termination inventory checklist listing all damages that landlord claims were caused by the tenant.

Allowable Charges

Security deposits cannot be used for normal wear and tear. Per MCL 554.607 the security deposit can be used only for the following:

  • To reimburse landlord for actual damages to the premises or any ancillary facility that are the direct result of conduct not reasonably expected in the normal course of habitation of a dwelling.
  • To pay landlord for all rent in arrearage under the rental agreement, rent due for early termination of the agreement by the tenant, and for utility bills not paid by tenant.

Notice of Tenant's Forwarding Address

As part of the security deposit return process, the tenant must provide a forwarding address at move out. And per MCL 554.603, the landlord must provide the following notice to the tenant, typically written into the 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.”

Failure of the landlord to provide the notice above relieves the tenant’s obligation to provide a forwarding address.

Procedure for Returning Security Deposit

If any amount of the security deposit is to be retained by the landlord in Michigan, the landlord has 30 days after the termination of the tenancy to mail the tenant an itemized list of damages claimed. The landlord must include in the notice the estimated cost of repair of each damaged property item and the amounts and bases on which the landlord intends to assess the tenant. The list shall be accompanied by a check or money order for the difference between the damages claimed and the amount of the security deposit held by landlord. Of course, only damages attributable to the tenant can be claimed. The notice of damages shall include the following statement 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.”

Once the landlord claims damages and gives notice of those damages, the tenant must respond by ordinary mail to the address provided by the landlord within seven days. The tenant’s response must indicate in detail the tenant’s agreement or disagreement to the damage charges listed.