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In Michigan, what landlords can deduct from a security deposit comes down to a short list in MCL 554.607:
- actual damage to the home beyond what normal living causes
- unpaid rent, including rent owed because the resident ended the lease early
- unpaid utility bills the resident was responsible for
The rest of Michigan’s deposit law runs on a handful of numbers. The deposit is capped at 1 1/2 months’ rent, and you have 30 days from move-out to mail either a full refund or an itemized list of damages with a check for the difference. Residents owe you a forwarding address within 4 days and a response to your list within 7. Skip a step and you forfeit every deduction. Wrongful retention can cost double the deposit. Every rule in this guide is checked against the current Landlord and Tenant Relationships Act, including the April 2025 amendment. To see how Michigan compares with stricter and looser states, start with our guide to landlord-tenant laws by state.
What Can Landlords Deduct From a Security Deposit in Michigan?
Only what MCL 554.607 names. The statute permits deductions to reimburse you for actual damages that are “the direct result of conduct not reasonably expected in the normal course of habitation.” It also covers rent in arrears, rent due because the resident terminated the lease prematurely, and utility bills the resident left unpaid. In practice that means:
- holes in walls, broken fixtures, burns, pet damage, and stains needing professional repair
- the rent balance still owed at move-out, and rent owed for breaking the lease early
- water, gas, or electric bills in the resident’s name that went unpaid
What the deposit can never cover is normal wear and tear. Faded carpet, small nail holes, and scuffed paint are the cost of someone living in the home. They fall squarely inside the “normal course of habitation” the statute protects, so they stay off the itemized list. Our guide to normal wear and tear in a rental draws that line item by item, and our broader walkthrough of what a landlord can deduct from a security deposit covers the judgment calls that apply in every state.
One deduction landlords assume is allowed but the statute never mentions: late fees. Unless your lease clearly defines late fees as additional rent, a Michigan court reading § 554.607’s short list may not let the deposit absorb them. Chase late fees during the tenancy instead of banking on the deposit.
How Much Can a Landlord Charge for a Security Deposit in Michigan?
One and a half months’ rent, and no more. MCL 554.602 states that a security deposit “shall not exceed 1 1/2 months’ rent,” so a $1,600-a-month home carries a maximum deposit of $2,400.
The cap is wider than the label on the money. Under MCL 554.601, anything refundable counts as part of the security deposit, whatever the lease calls it. A refundable pet deposit, a refundable cleaning deposit, and a refundable key deposit all stack inside the same 1.5-month limit. So does required prepaid rent: if your lease collects first and last month’s rent up front, the Michigan Legislature’s landlord-tenant guide confirms that the last month’s rent is legally part of the security deposit and eats most of your cap.
Genuinely non-refundable fees sit outside the cap. A non-refundable pet fee or application fee can be charged in any amount, provided the lease labels it clearly and it is truly not returnable. Courts still apply a general reasonableness check, and a “non-refundable” fee that covers the same ground as a refundable one will not survive scrutiny.
How Must a Michigan Landlord Hold the Deposit?
Two options, per MCL 554.604. Deposit the money in a regulated financial institution such as a bank or credit union, or post a cash or surety bond with the Michigan Secretary of State covering deposits up to $50,000 plus 25 percent of any amount above that. A bonded landlord may use the deposit funds freely, because the bond guarantees repayment.
Whichever route you choose, remember whose money it is. MCL 554.605 makes the deposit the resident’s lawful property until you establish a right to it by agreement or court judgment. Michigan does grant landlords one small mercy here: nothing in the Act requires you to pay the resident interest on the deposit.
What Notices and Checklists Does Michigan Require at Move-In?
Three paperwork duties start the clock, and the first two come with real consequences.
- The 14-day notice. Within 14 days of the resident taking possession, MCL 554.603 requires written notice of your name and address for communications, the name and address of the financial institution or surety holding the deposit, and the resident’s obligation to send a forwarding address within 4 days of moving out. That last item must appear in 12-point boldface type at least 4 points larger than the surrounding text. Most Michigan leases build all of this in. If you skip the notice, the resident is excused from the forwarding-address duty, which strips you of a key protection later.
- The inventory checklist. At move-in, MCL 554.608 requires you to hand over two blank copies of an inventory checklist matching the form you will use at move-out. The first page must tell the resident to complete it and return one copy within 7 days of taking possession.
- The prior list, on request. A new resident may ask for the termination inventory from the previous tenancy, and you must provide it. It is their preview of how you assess damage.
How Long Does a Landlord Have to Return a Security Deposit in Michigan?
30 days from the termination of occupancy. Within that window, MCL 554.609 requires you to mail either the full deposit or an itemized list of damages plus a check or money order for the difference. Each line on the list needs the estimated cost of repair, and the notice must include this exact statement in boldface: “You must respond to this notice by mail within 7 days after receipt of same, otherwise you will forfeit the amount claimed for damages.”
The deadline has no grace period. Under MCL 554.610, a landlord who fails to send the notice of damages within 30 days is deemed to agree that no damages are due and must immediately return the entire deposit.
The forwarding address is the one thing that pauses this machinery. MCL 554.611 obligates the resident to mail you a forwarding address in writing within 4 days of moving out. If they never do, you are relieved of the duty to send the itemized list, though the resident can still come back later and claim the deposit. Being excused from the paperwork does not mean you may quietly keep the money.
What Happens If the Resident Disputes Your Deductions?
The dispute follows a script with two deadlines, one for each side.
The resident moves first. Under MCL 554.612, they have 7 days from receiving your itemized list to respond by mail, agreeing or disagreeing with each charge in detail. A blanket “I disagree” does not qualify, and per the statutory notice, silence forfeits the amounts you claimed.
Then the burden lands on you, and this is the trap that catches Michigan landlords. If the resident disputes your deductions, MCL 554.613 gives you 45 days from the termination of occupancy, “and not thereafter,” to file suit for the disputed money or give it back. You may keep deposit funds without a judgment only in four situations: the resident never provided a forwarding address, the resident never responded to your list within 7 days, the two of you settled in writing, or your entire claim is unpaid rent for periods the resident actually had possession. Outside those exceptions, sitting on a disputed deposit is the expensive move. The statute is blunt: failure to comply fully “constitutes waiver of all claimed damages” and makes the landlord liable for double the amount of the security deposit retained.
Most of these cases land in small claims court, which in Michigan handles disputes up to $7,000 under MCL 600.8401. The judge will read the move-in checklist, the photos, and the mailing dates, and the better-documented side usually walks out with the money.
How Do You Return a Deposit Without a Dispute?
Deposit fights are documentation contests decided months before move-out. The habits that keep Michigan landlords out of small claims court:
- Treat the checklist as evidence, because it is. A completed commencement checklist plus dated photos turns “that stain was already there” into a checkable claim.
- Itemize with invoices, not guesses. The statute demands an estimated cost per item, and a contractor’s quote attached to each line ends arguments a round number would start.
- Calendar day 20. Mail the refund or the itemized list early enough that a holiday week cannot push you past day 30, and keep proof of the mailing date.
- Diary the 45-day line. The moment a dispute letter arrives, you are choosing between settling in writing, filing suit, or refunding. Choose before the window chooses for you.
The same discipline pays off across the whole tenancy. Our guide to managing a rental property covers the inspection and record-keeping systems that make move-outs uneventful.
FAQ
Does a landlord have to pay interest on a security deposit in Michigan?
No. The Landlord and Tenant Relationships Act contains no interest requirement, so the deposit comes back in the amount it went in, minus lawful deductions. The money itself remains the resident’s property while you hold it.
Can a landlord charge non-refundable fees on top of the deposit in Michigan?
Yes. Non-refundable fees, such as a flat pet fee or application fee, fall outside the security deposit definition and the 1.5-month cap. The lease must label them clearly as non-refundable. Any fee that is refundable counts as part of the security deposit by law, no matter what the lease calls it.
Can a resident use the security deposit as the last month’s rent in Michigan?
Not unilaterally. The deposit stays inside the § 554.607 process unless both parties agree otherwise in writing. One flip side: if the lease requires last month’s rent up front, Michigan law treats that prepayment as part of the security deposit, and it counts toward the 1.5-month cap.
What if the resident never gives a forwarding address?
You are relieved of the 30-day itemized-notice requirement under MCL 554.611, and the burden of filing suit shifts to the resident. Their underlying claim to the deposit survives, so keep the money accounted for and only apply it to uses § 554.607 allows.
Did Michigan’s security deposit rules change in 2024 or 2025?
The deposit mechanics have been stable since 1973: the cap, the 30-day deadline, and the penalties are all unchanged. The Act itself was amended by Public Act 179 of 2024, effective April 2, 2025, which added source-of-income protections. Landlords may not refuse or disadvantage residents because their rent is paid with vouchers, benefits, or other lawful subsidies, and income screening must count those sources.
This article is general information, not legal advice. Laws change, and every situation is different. For guidance on a specific situation, talk to a Michigan-licensed attorney.
