Landlord Tenant Guide - State of Michigan

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The security deposit is an amount ofmoney paid by the tenant to the landlord—other than the first rent payment (whateverperiod is established in the lease: weekly rentpayment, monthly rent payment, semiannualrent payment, and so on). The security depositremains the tenant’s property, but is held bythe landlord for the term of the lease to ensurethat the tenant pays the rent due, pays theutility bills, and returns the rented property inproper condition, as required by the lease. It isheld as security as the name implies.Once the lease is terminated, the tenanthas the right to have the entire securitydeposit returned unless the landlord cansubstantiate a claim to it because the tenant:1. Owes unpaid rent;2. Owes unpaid utility bills; or3. Caused damage to the rented propertybeyond reasonable wear and tear.Under Michigan law, both a tenant and alandlord have duties and must perform specificacts regarding the security deposit.Understanding the duties and taking action arecrucial. The law requires mandatory noticeprovisions, written communications, mailings,and strict compliance with time limits. If theduties are not performed precisely, the tenantrisks losing the return of his or her securitydeposit and the landlord risks losing a claim toit. This chapter explains the duties and thenecessary actions that must be taken. Yes. The law states that a security depositshall not exceed 1 1 ⁄2 times the monthly rent.Example: If a landlord charges $500 amonth for rental property, the maximumthe landlord may collect as a securitydeposit is $750 ($500 X 1.5 = $750). Any prepayment of rent—other than for thefirst full rental payment period established inthe lease—and any refundable fee or depositare considered by law to be part of thesecurity deposit.Sometimes the lease requires that both thefirst and last months’ rent be paid before atenant moves in. If this is the case, the lastmonth’s rent would be considered a securitydeposit. Sometimes, too, additional fees ordeposits are charged to hold the rentalproperty, for credit checks, for pets, forcleaning, for keys, for mailboxes, for storage,and for many other reasons. While these feesor deposits may not be called “securitydeposits” in the lease, if they are otherwiserefundable, they are still considered by law tobe part of the security deposit and subject tothe strict rules that Michigan has adopted—including the limit on the total amount that alandlord may collect. Yes. The law defines the term “securitydeposit” and limits the amount that may becollected (not to exceed 1 1 ⁄2 times the monthlyrent). Refundable fees are deemed—bydefinition—to be security deposits.Nonrefundable fees are not; and they can beassessed in any amount for any reason.Example: The monthly rent is $500 andthe lease calls for a $750 security deposit.In addition to the security deposit, thelease calls for a $250 refundable cleaningfee. Because the cleaning fee is refundable,it would be considered part of the securitydeposit—and that would put the amountcollected for a security deposit above the1 1 ⁄2 times monthly rent allowed, violatingMichigan law. If the lease, instead, declaredthe fee to be nonrefundable, it would beallowed.
The landlord must either:a) Deposit the money with a regulatedfinancial institution (e.g., bank), ORb) Deposit a cash bond or surety bond, tosecure the entire deposit, with the Secretary ofState. (Note: If the landlord does this, he or shemay use the money at any time, for anypurpose.) The bond ensures that there ismoney available to repay the tenant’s securitydeposit. The security deposit is considered thelawful property of the tenant, until the landlordestablishes a right to it—generally by obtaininga judgment in a court of law.If the landlord sells the rental property, heor she remains liable with respect to thetenant’s security deposit until any ONE of thefollowing occurs:a) The landlord returns the deposit to thetenant, ORb) The landlord transfers the deposit to thenew owner and sends notice—by mail—to thetenant informing him or her of the new owner’sname and address, ORc) The new owner sends written notice oftheir name and address to the tenant AND thename and address of the financial institutionwhere the deposit is held AND the tenant’sobligation to provide a forwarding addresswithin 4 days of terminating occupancy. The landlord must provide the tenant withcertain notices. Within 14 days from the daythe tenant moves in, the landlord must providewritten notice of the following:a) The landlord’s name and address forreceipt of communications regarding thetenancy;b) The name and address of the financialinstitution where the security deposit is held,OR the name and address of the suretycompany; and who filed the bond with theSecretary of State; andc) The tenant’s obligation to provide aforwarding address—in writing—within 4 daysafter the tenant moves out.Generally these notices are found in thelease itself. (See The Lease section; see alsothe model lease in the Appendices, whichdisplays all of these notices with the correctform and wording.) The checklist preserves some proof of thecondition of the property when the tenantmoved in. The landlord must provide thetenant with 2 blank copies of an inventorychecklist, referencing all items in the rentalunit. The landlord must provide written noticeon the first page of the checklist that thetenant must properly complete the checklist,noting the condition of the property, andreturn it to the landlord within 7 days aftermoving in. (See sample, page 41.)The tenant may request a copy of thetermination inventory checklist (generallyreferred to as the itemized list of damagescaused by the previous tenant). If requested,the landlord must provide a copy to thetenant. Yes. The checklist preserves some proof ofthe condition of the property when the tenantmoves in. If the tenant fails to properly fill outthe checklist, or fails to return it, and a disputeover damages to the property occurs at theend of the lease, it becomes the tenant’s wordagainst the landlord’s word.Further recommendation:Take photos or video tape recordings of therental unit before tenant moves in.
Page 4 and 5: Read the lease. Read the lease. Rea
Page 6 and 7: Note: Two copies of an inventory ch
Page 10 and 11: The tenant MUST provide his or herf
Page 12 and 13: Subleasing occurs when a tenant per
Page 14 and 15: If the landlord wishes to remove a
Page 16 and 17: c) Lease (attached to the Complaint
Page 18 and 19: of the rent was withheld for the pu
Page 21 and 22: Parties in a dispute can choose tom
Page 23 and 24: MACOMB, St. ClairThe Resolution Cen
Page 25 and 26: There is a cost for filing a small
Page 27 and 28: Maintenance problems range from thi
Page 29 and 30: should send a letter—certified ma
Page 39 and 40: Attach copy of lease or rental agre
Page 41 and 42: Disclosure of Information on Lead-B
Page 43 and 44: BEDROOMDOOR:WINDOWS:CARPET OR FLOOR
Page 45 and 46: TO: _______________________________
Page 47 and 48: TO: _______________________________
Page 49 and 50: TO:FROM:___________________________
Page 51: Forms prepared and approved by the

Landlord Tenant Guide - State of Michigan

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