Michigan Security Deposit Law: Limits, Deadlines & Deductions

Why Michigan is a paperwork state

The Security Deposits Act (MCL 554.601-554.616, 1972 PA 348) isn’t complicated, but it’s technical. Most of the rules are about notices and forms at specific times, and missing one can cost you the right to keep any of the deposit, even when the damage was real. The easiest way to stay inside it is to treat the deposit as a short checklist that runs from lease signing to day 45.

Before move-in: the cap and the lease

The deposit can’t exceed one and a half months’ rent. At $1,600 rent, the most you can hold is $2,400. Refundable money held against damage, such as a pet deposit, generally counts toward that total. A nonrefundable fee (if your lease uses one) should be labeled clearly in writing.

Your lease should also tell the tenant, in plain terms, that they must give you a forwarding address in writing within 4 days of moving out. That notice is what makes the 4-day rule enforceable, so check your lease template for it.

Michigan’s Truth in Renting Act (MCL 554.631 et seq.) can void certain lease clauses, so a lease form copied from another state is risky.

Day 1 to day 14: where the money goes and the written notice

Put the deposit in a regulated financial institution, or secure it with a cash or surety bond. Within 14 days after the tenant takes possession, give them written notice with:

• Your name and address for receiving notices
• The name and address of the institution or bonding company holding the deposit
• The tenant’s obligation to give a forwarding address within 4 days after moving out

This is the step small landlords skip most often, and it’s the one that hurts when a deposit dispute reaches court.

At move-in: the inventory checklist

The Act requires a move-in inventory checklist. Give the tenant two blank copies, have them note the condition of each room and return one signed copy, and keep it with the lease. Dated photos on top of the checklist make it much stronger.

Move-out: the 4-day address and the 30-day list

After the tenant leaves, complete the move-out checklist. The tenant has 4 days to send a forwarding address in writing. Within 30 days after the tenancy ends, mail an itemized list of damages to that address. The list should state the estimated cost of each repair and tell the tenant they have 7 days to respond in writing.

Disputes and the 45-day deadline to sue

If the tenant writes back within 7 days disputing a charge, you can only keep the disputed amount by filing suit in district court within 45 days after the tenancy ends. If you don’t file, the disputed money goes back.

Wear and tear versus damage

Deductions are limited to unpaid rent, actual damage beyond reasonable wear and tear, and other amounts owed under the lease. A dull finish on hardwood after five years is wear. Gouges from dragged furniture are damage. A thin spot on the carpet near the couch is wear. A hole burned by a space heater is damage. When it’s close, compare the move-in checklist to the move-out one; whatever changed and isn’t normal aging is what you can charge.

A worked example at $1,600 a month

You rent a Grand Rapids duplex unit for $1,600 and collected $2,400. You gave the 14-day notice and both checklists. The lease ends August 31.

• September 2: the tenant emails a forwarding address (within 4 days).
• Walk-through: a broken storm door closer ($120), paint over a large marker stain on a bedroom wall ($210), and a missing kitchen drawer front ($65). Worn stair carpet is wear and tear.
• September 25: you mail the itemized list totaling $395, with a check for $2,005 and the 7-day response notice.
• September 29: the tenant disputes the $210 paint charge in writing.

You now have until October 15 (45 days after the tenancy ended) to file suit for the $210. Many landlords decide a $210 claim isn’t worth a court date and refund it. Either way, decide before the 45 days run out.

What it costs to get it wrong

Fail to comply with the Act and you can lose the right to keep the deposit. A tenant who sues can also recover double the amount you kept in violation of the Act. Many cities, including Detroit, Ann Arbor, Grand Rapids and Lansing, also require rental registration or inspection certificates, which can affect your position in any dispute.

This page is general information, not legal advice. If a deposit fight is headed to district court, talk to a Michigan landlord-tenant attorney first.