Landlords and Tenants in Michigan – There are few things most landlords and tenants are unaware of security deposits in tenancy. Here are few:
1.There a limit on the amount that a landlord may collect as a security deposit and the law states that a security deposit shall not exceed 11⁄2 times the monthly rent.
2.What exactly is considered a security deposit?
– Any prepayment of rent—other than for the first full rental payment period established in the lease—and any refundable fee or deposit are considered by law to be part of the security deposit.
Sometimes the lease requires that both the first and last months’ rent be paid before a tenant moves in. If this is the case, the last month’s rent would be considered a security deposit. Sometimes, too, additional fees or deposits are charged to hold the rental property, for credit checks, for pets, for cleaning, for keys, for mailboxes, for storage, and for many other reasons. While these fees or deposits may not be called “security deposits” in the lease, if they are otherwise refundable, they are still considered by law to be part of the security deposit and subject to the strict rules that Michigan has adopted— including the limit on the total amount that a landlord may collect.
3.Things landlord must do with security deposit :
The landlord must either:
a) Deposit the money with a regulated financial institution (e.g., bank), OR
b) Deposit a cash bond or surety bond, to secure the entire deposit, with the Secretary of State. (Note: If the landlord does this, he or she may use the money at any time, for any purpose.) The bond ensures that there is money available to repay the tenant’s security deposit.
4.The security deposit is considered the lawful property of the tenant, until the landlord establishes a right to it—generally by obtaining a judgment in a court of law.
If the landlord sells the rental property, he or she remains liable with respect to the tenant’s security deposit until any ONE of the following occurs:
a) The landlord returns the deposit to the tenant, OR
b) The landlord transfers the deposit to the new owner and sends notice—by mail—to the tenant informing him or her of the new owner’s name and address, OR
c) The new owner sends written notice of their name and address to the tenant AND the name and address of the financial institution where the deposit is held AND the tenant’s obligation to provide a forwarding address within 4 days of terminating occupancy.