Security deposits in Michigan are regulated by Michigan Compiled Laws § 554.601 to § 554.615. Certain municipalities may have local laws that supplement state regulations. To ensure full compliance, verify the regulations applicable in your area.

Maximum Security Deposit

Security deposits are limited to one and a half months’ rent. 

Holding & Interest Requirements

Holding Requirements: The security deposit must be held in a regulated financial institution (bank or savings and loan association). Alternatively, landlords/property managers may post a cash or surety bond obtained from a surety company licensed to do business in Michigan.

Interest on Deposits: Michigan state law does not currently require landlords to pay tenants interest on security deposits.

Information Provided to Tenant: Landlords/property managers may not require a security deposit unless they notify the tenant in writing, no later than 14 after the tenant takes possession of the rental unit, of: (1) landlord/property manager’s name and address to send communications; (2) the name and address of the financial institution where the security deposit is being held; and (3) the tenant's obligation to provide a forwarding address to the landlord/property management company in writing within 4 days after termination of occupancy. 

This notice shall include the following statement in 12 point boldface type (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.”

Deposit Refunds

Timeline: Upon termination of the tenancy, the landlord/property manager must complete an inventory checklist listing all the damages caused by the tenant. Within 30 days of vacancy, the landlord/property manager must either (1) return the full security deposit to the tenant or (2) provide the tenant with an itemized list of damages, together with the portion of the deposit being returned. 

Permissible Deductions: Landlords/property managers may deduct the following from security deposit funds:

• Unpaid rent or utilities
• Damages beyond normal wear and tear

Documentation of Deductions: The itemized list of damages delivered to the tenant must specify the estimated cost of repair of each damaged item and include the following statement in 12 point boldface type (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.” Upon receipt of the list of damages, the tenant must respond by mail to the landlord, indicating in detail their agreement or disagreement with the damage charges listed. 

If the tenant disagrees with the charges, the landlord/property manager must commence a court action within 45 days of vacancy for damages claimed against the tenant or, in lieu thereof, return the balance of the security deposit withheld or any amount mutually agreed upon in writing by the parties. A landlord/property manager is not entitled to retain any portion of a security deposit for damages claimed unless: 

(1) the landlord/property manager has obtained a money judgment for the disputed amount; 

(2) the landlord/property manager has filed proof of an inability to obtain service on the tenant with a court having jurisdiction over the parties; 

(3) the tenant has failed to provide a forwarding address; 

(4) the tenant has failed to respond to the landlord/property manager’s itemized list/notice of damages;

(5) the amount claimed is entirely based on accrued and unpaid rent equal to the actual rent for one full rental period, or portion thereof, during which the tenant had possession of the rental unit. 

‍Penalties for Violations: Failure to return the deposit or provide the itemized list of damages as required may result in the landlord/property manager being liable for up to 2x the amount wrongfully withheld, reasonable attorney’s fees, and court costs if the tenant wins in a lawsuit.

Sale of the Rental Property

If the property is sold, the landlord must: (1) transfer the security deposit to the new owner and provide written notice to the tenant of the new owner’s name and address, or (2) return the security deposit to the tenant.