Security Deposits

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A security deposit or damage deposit is any required prepayment of rent other than the first month's rent.  During the time that you live in a place, your landlord holds on to it, but it's your money.  Landlords earn money, legally and illegally, from security deposits.  The legal earnings come from the interest that landlords collect.  The illegal earnings come from the many illegal fees that landlords often deduct from security deposits.  To prevent your landlord from withholding money that is legally yours, know the law and follow the steps below.

The Security Deposit Law

Security deposits are regulated by the Michigan Landlord-Tenant Act. The law applies to all tenants in the state, including subtenants, and applies to verbal as well as written leases.  It states that the total security deposit charged cannot be more than one and a half times the monthly rent.  Security deposits include "any required prepayment of rent other than the first full rental period of the lease."

Landlords can deduct from security deposits for three things only:

1. unpaid rent
2. unpaid utilities, or
3. actual damages to the rental unit

These "actual damages" must be the result of conduct not reasonably expected in the normal course of living.  Therefore, a landlord may not deduct to pay for damages that are the result of normal wear and tear.  For example, a chair that rubs or bumps against a wall may leave marks, or your feet walking on the carpet may pack it down.  However, these marks and carpet wear are not damage.  Some marks are to be expected as normal wear and tear.  Your landlord may not use your security deposit money for a normal cleaning job.  But if someone threw a chair or a hammer through the wall, the damage to the wall would be unusual and the landlord could deduct the costs of repairing it.  

Where the Security Deposit Can Be Held

The Security Deposit Act also requires that the landlord deposit the money in a regulated financial institution.  The name and address of the institution must be given to the tenant upon rental and the landlord may only use the money if s/he posts a bond in its place with the Secretary of State.  If a bond is posted, the landlord may use the money, even though the deposit legally remains property of the tenant.  Landlords are not required to pay the tenant interest earned on security deposits.

Getting Your Security Deposit Back

• When moving in
  When you first move into your apartment, your landlord is required to present you with an inventory checklist.  If your landlord does not provide a checklist, ask for one; it is your protection against being charged for damages that existed before you moved in.  On this list, write down every damaged thing that you see, regardless of how minor it might appear - for example, paint chips, cracked windows, broken tile, stained sinks or carpets, scratches on furniture, torn upholstery or screens.  You must return a copy of the inventory checklist to your landlord within seven days from your move-in date.  Keep a copy.  A copy of the checklist can be very helpful in getting back your security deposit at the end of your lease.  The inventory checklist is proof of the condition of the apartment before you moved in.  
  
• When moving out
  
  1. You must give your landlord a forwarding address, in writing, within four days of the date you move out.  It might be a good idea to send it certified mail or give it to her or him in person.  If you are moving out of state, consider giving the landlord a local address that will accept mail for you.  Some landlords will make deductions if they think the tenant has moved out of state and it will not be worth the tenant's expense of returning to sue in Small Claims Court.  This is illegal, but it's a typical landlord tactic to make more money.
     
  2. Within 30 days of the date you moved out, your landlord must send you an itemized list of any deductions claimed and the remainder of your deposit, or your full deposit if no charges are taken out.  If your landlord does not meet this 30-day requirement, she or he technically loses all claims to your security deposit and must return it in full, unless the withheld money is for past rent that is due.

     The notice listing any deductions from your deposit must include in boldface type the warning: "You must respond to this notice by mail within 7 days after receipt of same, otherwise you will forfeit the amount claimed for damages."

     If your landlord has not contacted you within 30 days, you may need to send her or him a letter stating that it has been more than 30 days and thus any claim on your deposit has been forfeited.  Also state that if you do not receive your deposit in full within 45 days of the date you moved out, you intend to file in Small Claims Court and sue for double the deposit as provided by state law.  Attempting to settle the dispute out of court in this way may increase your chances of successfully settling with your landlord, or at least improve your chances of winning double the security deposit.  As always, keep copies of letters; they may be helpful in court. (See our "Sample Letters-Tenant Demanding Return of Security Deposit.")

  3. To contest the amount the landlord withheld, you must respond in writing within seven days of receiving the list of deductions. The letter must be mailed within seven days.  You may dispute all or any portion of the landlord's list of deductions.  You can dispute a claim for damage on the basis of it not happening while you were there, that it is not actual damage, or that the amount the landlord is asking for is too high for the damage done.  It may be helpful to refer to your inventory checklist as proof that the damage was there before you moved in (see our information on moving in, above; also see our "Sample Letters-Tenant Disputing Deductions from Security Deposit").

     You are supposed to respond within seven days of receiving the landlord's list of deductions.  However, if you do not, you have not necessarily given up the right to get your money back, but you may have eliminated your chance of receiving double your security deposit back after 45 days. If you miss the seven day deadline, respond in writing as soon as possible.

  4. If the landlord does not settle on the terms of your letter or make some alternative settlement with you within 45 days of the date you moved out, she or he is supposed to sue you in Small Claims Court keep any disputed amount beyond actual rent for the time you were in the unit, or money to satisfy an eviction judgment.  Landlords rarely do this.
     
  5. If your landlord does not sue within 45 days, you are entitled to sue in Small Claims Court for double the amount in dispute.

To return to the Michigan Tenants Counseling Program web site, click here.