Michigan Security Deposit Laws

Key Takeaways

• Strict Deposit Limits Apply: Michigan landlords may collect a security deposit of up to 1.5 times the monthly rent, with no exceptions. Pet deposits must also fall within this cap.

• Storage and Handling Are Regulated: Security deposits must be held in a regulated financial institution or secured with an approved surety bond. Landlords must disclose where the deposit is held and are not required to pay interest.

• Follow Deduction and Return Rules Carefully: Landlords have 30 days after move-out to return the deposit or provide an itemized list of lawful deductions. Missing deadlines or making improper deductions can result in losing the right to withhold funds.

Renting out a property in Michigan involves financial risk, from unpaid rent to property damage beyond normal wear and tear. A security deposit helps protect landlords from these losses, providing a limited but important financial safeguard when a resident moves out.

However, Michigan law strictly regulates how security deposits are collected, handled, and returned. Under Michigan landlord-tenant laws landlords must follow specific rules regarding deposit limits, storage requirements, allowable deductions, and return deadlines.

This guide from Bokani Property Management Group breaks down the essentials of Michigan security deposit laws, helping landlords stay compliant, avoid costly disputes, and protect their rental investment.

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Guide to Michigan Security Deposit Law

Understanding Michigan security deposit law is essential for landlords to stay compliant, avoid disputes, and protect their rental income.

Maximum Security Deposit Limit

In Michigan, landlords can collect a security deposit of up to 1.5X the monthly rent. For instance, if you’re charging a monthly rent of, say, $2000, you can collect a security deposit of up to $3,000.

Michigan law doesn’t provide any exceptions that allow landlords to charge a dime more than the limit. It remains the same for every rental agreement, regardless of the lease type or lease length.

Additional Pet Deposits

In Michigan, no state law limits how much pet deposits landlords can charge. Be that as it may, the total security deposit must not exceed the state’s limit of 1.5X the monthly rent.

Alternatively, you could charge residents a recurring pet rent in lieu of a pet deposit. However, please note that disabled residents with assistance animals have special privileges under the Federal Fair Housing Act (FHA).

Under the FHA, “disability” is a protected group, and additional deposits or fees are illegal.

Security Deposit Storage Rules

Michigan law dictates the manner in which landlords must store residents’ security deposits. This is unlike some other states, like the neighboring state of Indiana, which has no regulations in this regard.

There, landlords can, for instance, commingle residents’ security deposits with personal funds. In Michigan, however, landlords must store residents’ security deposits in a regulated financial institution.

You must also provide the resident with the institution’s name and address. The other option you have is to secure it with an approved surety bond. And since there is no requirement to store the deposit in an interest-bearing account, there is no interest due to residents.

Security Deposit Deductions

Michigan landlords may deduct certain costs from a resident’s security deposit after move-out, as long as the deductions are lawful, reasonable, and properly documented.

Common allowable deductions include:

• Damage beyond normal wear and tear, such as large holes in walls, graffiti, deep scratches in hardwood floors, or cracked or missing tiles.

• Unpaid rent owed under the lease at the time the resident moves out.

• Excessive cleaning costs when the unit is left significantly dirtier than its move-in condition, excluding ordinary wear from everyday living.

• Unpaid utilities that the lease agreement clearly assigns to the resident.

That said, Michigan law also places clear limits on what landlords may deduct. You may not withhold security deposit funds for:

• Normal wear and tear, including minor carpet scuffs, faded paint, or general carpet wear.

• Damage caused by deferred maintenance or landlord neglect, such as issues resulting from unrepaired leaks or aging systems.

• Routine cleaning associated with normal use of the property during a standard tenancy.

Michigan does not cap the amount a landlord may deduct from a security deposit, provided the charges are legitimate and calculated in good faith.

If repair or cleaning costs exceed the deposit amount, a landlord may seek reimbursement from the former resident, including pursuing the balance through small claims court if necessary.

Security Deposit Returns

Michigan landlords generally have 30 days after a resident moves out to return the security deposit or provide an itemized list of lawful deductions, along with any remaining balance.

Missing this deadline may result in losing the right to withhold any portion of the deposit. Refunds and itemized statements must be mailed to the resident’s written forwarding address, which the resident must provide within four days of moving out.

If no forwarding address is given, the landlord is not required to send an itemized list of damages.

If deposit deductions are made, the itemized statement must clearly list each charge and inform the resident that they have seven days after receipt to dispute the deductions in writing. Failure to follow these rules can require landlords to return the full security deposit.

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Bottom Line

Understanding and following Michigan’s security deposit laws is essential for every landlord. Failing to comply can result in costly penalties, including being required to pay a resident up to twice the amount wrongfully withheld.

Staying informed and handling deposits properly helps protect both your investment and your legal standing.

If you have questions or want expert support, Bokani Property Management Group is here to help. We specialize in buying, managing, and protecting commercial and residential properties in Royal Oak, MI.

Contact us today to learn how professional property management can simplify compliance and maximize your returns.

Please note that the information provided in this blog is intended for general guidance and should not be considered as a replacement for professional legal advice. It is important to be aware that laws pertaining to property management may change, rendering this information outdated by the time you read it.