Security Deposits in Michigan

 

There is a fair amount of confusions in Michigan. How much can one charge? What if the damages exceed the security deposit? Can claims for damages only be made against the security deposit? What if damage is found after the security deposit has been returned or the discovery of damage happens after the 30 day window to return the security deposit?

Security deposits are governed by Act 348 of 1972 (commonly called the Landlord-tenant Act) under Michigan law. Under this law, a security deposit cannot exceed 1.5 times the monthly rent. Additional fees, so long as they are not refundable, are not considered part of the security deposit. But, if a fee is refundable, then it is considered part of the security deposit.

The security deposit may only be used as follows:

(a) Reimburse the landlord for actual damages to the rental unit or any ancillary facility that are the direct result of conduct not reasonably expected in the normal course of habitation of a dwelling.

(b) Pay the landlord for all rent in arrearage under the rental agreement, rent due for premature termination of the rental agreement by the tenant and for utility bills not paid by the tenant.

So, what happens when actual damages exceed the security deposit? Then the landlord may proceed to court and claim the additional damages in a lawsuit.

Under Michigan law, the security deposit must be returned to the prior tenants within 30 days of termination of occupancy (when that occurs is important and a source of litigation, but is outside the scope of this discussion). Sometimes, though, a landlord may determine damages after 30 days. What recourse is available to the landlord?

In Oak Park Village v. Gorton, the Michigan Court of Appeals considered the timing requirement for return of a security deposit, as well as the timing requirement for claims against the security deposit. The court concluded that the Landlord-tenant Act’s provisions dealing with claims against the security deposit are for claims for damages arising from the security deposit. The landlord is not, “in any way enhance, restrict, or affect pre-existing statutory and common-law remedies for damages or for unpaid rent.” Therefore, a landlord is not prohibited from pursuing actions outside of the security deposit under statutory and/or common law actions for damage to the property and/or unpaid rent. Thus, claims such as negligence are permitted to proceed without the time constraints under the Landlord-tenant Act. What these claims may be are very fact specific, such as what damage has occurred. But, a landlord is not precluded from claims outside the Landlord-tenant Act.

If you are a landlord or a tenant and have questions or concerns about the security deposit laws or any other aspect of the landlord-tenant relationship, please contact Benjamin Long of Schmidt and Long.