Tenants And Landlords Resource Guide - Michigan State University, College Of Law Page 12
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39notice provisions, written communications,
on the total amount that a landlord may
mailings, and strict compliance with time
collect.
limits. If the duties are not performed
Q3 Is there a difference between a fee and
precisely, the tenant risks losing the return
a deposit?
of his or her security deposit and the
Yes. The law defines the term “security
landlord risks losing a claim to it. This
deposit” and limits the amount that may be
chapter explains the duties and the necessary
collected (not to exceed 1.5 times the
actions that must be taken.
monthly rent). Refundable fees are deemed –
COLLECTING THE SECURITY
by definition – to be security deposits.
DEPOSIT AT THE BEGINNING OF
Nonrefundable fees are not; and they can be
THE TENANCY
assessed in any amount for any reason.
However, sometimes a court will impose a
Q1 Is there a limit on the amount that a
general concept of “reasonableness” in
landlord may collect as a security deposit?
determining whether a particular fee amount
Yes. The law states that a security
may be charged, such as with late rent fees.
deposit shall not exceed 1.5 times the
Example: The monthly rent is $500 and the
monthly rent.
lease calls for a $750 security deposit. In
Example: If a landlord charges $500 a
addition to the security deposit, the lease
month for rental property, the
calls for a refundable $100 snow removal
maximum the landlord may collect as
fee for “removing snow from any common
a security deposit is $750
area,” and a nonrefundable $250 community
($500 x 1.5 = $750).
fee for “cost of landlord-sponsored social
events and common-area snow removal.”
Q2 What exactly is considered a security
Because the $100 snow removal fee is
deposit?
refundable, it would be considered part of
Any prepayment of rent – other than for
the security deposit and violate Michigan
the first full rental payment period
law because the amount collected for a
established in the lease, and any refundable
security deposit would exceed the 1.5 times
fee or deposit, are considered by law to be
monthly rent limit. The nonrefundable $250
part of the security deposit.
fee violates Michigan law because it covers
Sometimes the lease requires that both
a matter also covered by a refundable fee. If
the first and last months’ rent be paid before
the lease, instead, required a nonrefundable
a tenant moves in. If this is the case, the last
snow removal fee and a nonrefundable
month’s rent would be considered a security
community fee for “cost of landlord-
deposit. Sometimes, too, additional fees or
sponsored social events,” it would, absent
deposits are charged to hold the rental
other contrary or confusing lease terms, be
property, for credit checks, for pets, for
allowed. Nonrefundable fees in any amount
cleaning, for keys, for mailboxes, for
may be charged as long as the tenant accepts
storage, and for many other reasons. While
them by undertaking the tenancy.
these fees or deposits may not be called
Q4 Once collected, what must the landlord
“security deposits” in the lease, if they are
do with the security deposit?
otherwise refundable, they are still
considered by law to be part of the security
The landlord must either:
deposit and subject to the strict rules that
a) Deposit the money with a regulated
Michigan has adopted – including the limit
financial institution (e.g., a bank); OR
T e n a n t s a n d L a n d l o r d s R e s o u r c e G u i d e
Page 10
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