Anyone who has ever rented — or rented to someone — knows that there can be a lot of negativity surrounding the security deposit. As a landlord, knowing what goes into it can save you some bickering or even a lawsuit.
We’ve assembled some quick-hit facts according to Michigan state laws about security deposits in every step of the process — from signing the lease to move out day.
What is a Security Deposit?
The first thing to know about security deposits is that, according to law, they are the property of tenants held by landlords to ensure rent is paid, utility bills are paid, and the property is kept in the same condition in which it was first rented. After a lease is up, the tenant is due back their deposit unless they (1) owe unpaid rent, (2) owe unpaid utility bills, or (3) caused damages — other than wear and tear — to the property.
In order to understand what landlords can charge for once the tenant is out, it’s first important to understand the legality of collecting a deposit. First of all, a landlord cannot ask for a deposit that is larger than one and a half month’s rent.
While there can be fees for things like pets, credit checks, storage, mailboxes, and keys, all of these fees are still considered a security deposit depending on certain verbiage. If fees are labeled “refundable fees,” they are considered part of the security deposit. If they are labeled “non-refundable fees,” they are additional to the security deposit.
There are three notices landlords and tenants are both required to provide regarding security deposits. Generally, these notices are in the lease.
- By 14 days after the tenant moves in, the landlord must provide the name, address, and receipt of communications regarding the tenancy.
- The name and address of the bank where the deposit is being held or who filed the bond with the Secretary of State.
- The landlord must tell the tenant it’s their obligation to provide a forwarding address within four days after move-out date.
The Inventory Checklist
While it’s not illegal not to have an inventory checklist done for your property, it can save some trouble in disputes over deposits. If a checklist isn’t done, it becomes one person’s word over another.
It must state on the first page of the checklist that the tenant is required to return the filled-out list to the landlord seven days after moving in. The checklist should include everything that is in the unit — such as appliances and carpeting.
It is also recommended that the tenant and the landlord both take photos or video of the property prior to when the tenant moves in. It’s a good idea to have a newspaper with the day’s date in some of the shots.
At The End of the Lease
Thirty days after the tenant moves out, the landlord must:
- Return the entire amount of the deposit by mail — which the tenant should have provided four days after moving out. OR
- Mail a list of damages and the remaining security deposit or additional charges. The notice has to state the tenant has seven days to respond to the receipt, otherwise the amount for damages will be forfeited.
If a tenant chooses to dispute charges, the landlord must either negotiate them or decide to go to court.
What is Wear-and-Tear vs Damages?
Things like smudges on walls as well as the wearing of appliances are considered normal wear and tear. The landlord cannot charge for things like painting walls or shampooing carpets — unless excessive cleaning is needed in which it is then considered damage.
An example of things that a landlord can charge for, however, would be holes in walls, broken windows, broken blinds, or a broken appliance that is relatively new.
For more information on deposits, you can read more on Michigan’s government website.