Security deposits are an important tool for property owners to protect their investments, but they come with strict legal requirements. In Michigan, there are clear laws that govern how security deposits must be collected, handled, and returned. As your property management partner, we follow these regulations carefully to safeguard your property, reduce risk, and ensure a smooth experience for both owners and tenants.
In this blog, we’ll explain:
- The basics of how security deposits and Notices of Damages work
- How we handle the process
- Common misconceptions that property owners should be aware of
Michigan Security Deposit Basics
In Michigan, property owners can collect a security deposit equal to up to 1.5 times the monthly rent. This deposit is intended to cover potential tenant-caused damages beyond normal wear and tear, unpaid rent, or unpaid utilities at the end of a lease.
It’s important to note that security deposits are legally considered to be the property of the tenant and must be held in an escrow account during the tenant’s tenancy. Failing to use an escrow account can expose you to penalties.
This provides the basis for the strict legal requirements that dictate the security deposit process, including the maximum amount able to be collected and the process for returning it to the tenant upon their moving out at the end of the lease.
Notice of Damages and Deposit Return: The Legal Process
Within 30 days, Michigan law requires:
- The tenant must provide a forwarding address within 4 days of moving out.
- The property owner or property manager must:
- Send the tenant an itemized Notice of Damages listing any deductions.
- Return any remaining security deposit.
- Mail these to the forwarding address provided by the tenant.
The Notice of Damages must include:
- A description of each item deduction.
- The associated cost of repair or replacement (accounting for depreciation where applicable).
- Information on the tenant’s right to dispute the charges in writing within 7 days of receiving the notice.
If the tenant submits a written dispute for any of the charged items that appear on the notice of damages, and an agreement is not reached, the State of Michigan requires the owner or property manager to submit a claim to the appropriate small claims court within 45 days of the tenant moving out for the sum being retained from the security deposit. Without a court filing, the owner loses the right to keep the dispute funds.
It’s crucial for property owners or management companies to abide by these strict timeframes to avoid repercussions. If the timeframes are not followed correctly, the tenant may be entitled to double their original security deposit.
How We Manage the Process to Protect Your Investment
We take a highly detailed, documented approach to handling security deposits and damages to ensure lawful compliance and to have evidence to support claims in the event that an item is disputed or the case goes to the small claims court.
United Properties’ process includes:
- Thorough Move-In and Move-Out Inspections: Before a tenant moves in and after they move out, we conduct detailed inspections with photos to clearly document the condition of the property, noting any damages that occurred during the tenancy.
- Inventory Checklist Retention: Following Michigan State law, tenants are given an inventory checklist at move-in, which they have 7 days to complete and return. This document becomes an essential piece of supporting evidence if any disputes arise.
- Depreciation Consideration: We carefully factor in depreciation when assessing damage charges for items like blinds, flooring, and appliances to ensure we charge tenants fairly and legally.
- Deadline Tracking: Our internal systems track all move-out dates and security deposit deadlines through Rent Manager, ensuring that Notices of Damages and deposit refunds are sent on time.
Handling Tenant Disputes
Some tenants will dispute at least one charge listed on the Notice of Damages. Under Michigan law, tenants must submit their disputes in writing within 7 days of receiving the Notice of Damages.
When a dispute is received:
- We provide the tenant with supporting documentation, including the inventory checklist (if the tenant submitted one), before-and-after photos, and detailed inspection notes.
- We thoroughly review the tenant’s claims to determine if any adjustments are appropriate.
- We negotiate in good faith when a tenant raises a valid point.
As previously mentioned, if a settlement cannot be reached during the dispute process, Michigan law requires the property owner or management company to file a court case within 45 days of the tenant moving out if they want to pursue the disputed amount. Otherwise, they forfeit the right to retain the deposit.
Filing and attending a court case can be a lengthy and expensive process, and it doesn’t guarantee that the judge will rule in favor of the owner. In fact, we have seen many cases where, despite precautions taken and sufficient evidence of the damages, the judge still ruled in the tenant’s favor, leaving the property owner out the funds held from the security deposit on top of the filing costs, administrative time, and other costs associated with filing and attending a small claims case.
We handle the dispute and filing process for our owners when necessary, but we advise when a reasonable settlement may save time, legal fees, and additional costs.
Why Settling Disputes Can Sometimes Be the Smart Choice
In many cases, settling disputes is often more favorable for property owners due to the court system ruling in the tenant’s favor more often than not. After the court costs and a potentially unfavorable ruling, property owners may be out more money than if the disagreement had been settled outside of court.
With that being said, United Properties will go to court for charges relating to a tenant’s Notice of Damages and security deposit in the event that the dispute is over a large sum with substantial evidence to support the charge. We will always consult with the property owner prior to making a decision to file with the small claims court due to the financial requirements for doing so, along with the risk of an unfavorable outcome.
Our goal is always to find a resolution that protects your bottom line while minimizing stress, cost, and legal exposure.
Common Mistakes Owners Make with Security Deposits
It’s common for property owners to assume that any wear, tear, or damage at move-out can be deducted from the security deposit. However, Michigan law sets clear limitations on what can and cannot be charged to tenants.
Here are some important points to remember:
- Normal wear and tear cannot be charged to the tenant. Small nail holes, minor carpet wear, and scuff marks are considered normal.
- Routine maintenance cannot be charged to the tenant. This includes routine cleanings (including carpet cleaning), re-caulking, landscaping (including trimming shrubs and removing saplings), etc.
- Item depreciation must be factored into damage charges. For example, you can’t charge a tenant the full cost of a brand-new carpet if the old one was already several years old.
- Thorough documentation is critical. Without clear move-in and move-out records, disputes can quickly turn into court cases that are more likely to favor the tenant.
We understand these nuances and handle them carefully to protect your property while remaining compliant with the law.
Protecting Your Property the Right Way
It’s important for property owners to understand the laws that dictate the rental industry and how those laws dictate processes. When handled correctly, security deposits are a tool that can be used to protect your investment property, and our thorough and legally compliant process can help give you peace of mind, knowing that your rights and financial interests are in good hands.
Reach out today for a free consultation to learn more about how we can help you stay compliant and manage the security deposit process with confidence.
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Sergio joined United Properties in 2020. He is a graduate from Pickens Technical College as a Nurse Assistant and as a Small Animal Care Provider in 2010. In the past nine years, Sergio has had various jobs, all focused around customer service.
Eden joined United Properties in 2016. Eden graduated from Davenport University in 2015 with an Associate’s in Business Administration. She’s the Executive Assistant to the Owner of United Properties, with a focus on procedural documentation. She enjoys playing guitar, reading, and doing outdoor activities. Eden is trilingual and able to communicate in English, Spanish, and American Sign Language. 
David joined the United Properties team in 2019 as the Director of Client Relations and Business Development. In this capacity, he is responsible for leading all leasing, application underwriting, tenant relations, accounts receivable, process improvement, remote workers, and general office functionality (essentially anything outside of maintenance and service). David comes from a longstanding career at a Fortune 15 company primarily in a sales and customer service leadership role.
Matthew joined the United Properties in early 2020. He is a graduate of Lee University with a bachelor’s in Intercultural Studies and also a master’s in Discipleship and Christian Formation. Matthew serves as a project manager over the Rent Ready process. He has 20 years of construction experience and over 10 years of experience in leadership positions. He oversees a team of technicians and schedules outside vendors getting properties back to the United rent-ready standard so that they can be leased again.
Cristina joined United Properties as the Accounting and Billing Team Lead in October of 2020. She has experience as a technology professional, an English-Spanish translator, and has worked the past several years as the treasurer of her condominium.
Rick joined United Properties in 2020 as a Service Coordinator and then later transitioned to the Collections team, where his customer service shines. Rick has an extensive background in customer service and enjoys being able to resolve issues. He and his wife are raising their two kids and in his free time, Rick enjoys making his own homemade jerky.
Harriet joined United Properties as a Accounting & Billing Specialist in February of 2021. She has experience as a bookkeeper and a Property Manager for a Real Estate account. She was a working student during her college days. Harriet loves cleaning because she thinks it is therapeutic. She also loves watching series during her free time, and she’s a fur mom of one dog. Her inspiration to work every day is her family.
Diego has an extensive background in customer service and, most recently in Maintenance and
Paulina joined United in early 2021 as a Leasing Assistant. She has a background studying social work, with several years of experience in customer service. She speaks English and Spanish fluently and loves to learn. Paulina enjoys small road trips and cold, rainy weather. Her dog is her favorite thing in the world.
Jessica has a Bachelor’s Degree in Financial strategies and public accounting and is studying a masters in Blockchain and Fintech regulation. She has previous experience as a customer service representative. She speaks English and Spanish. She loves taking long walks with her three dogs, hiking and road tripping during the weekends.
Chris Good is new to the United Properties Team since June 2022 as a Business Development Manager. With years of experience in both the construction industry (Master Electrician) and the Real Estate industry (Broker), he will closely work with new and experienced investors to facilitate their real estate goals.
Melba Alvarez
Enrique Vergara (Henry)
Alyssa Conklin
Leo Lacson
Dhyana Aragon
Joksan Gomez
Soroya has been with United Properties since March 2025. Her problem-solving, time management, and communication skills help her shine when working collaboratively with tenants and prospects. She is currently pursuing a degree in Cyber Security at Davenport University. Thanks to her tech-savviness, she excels at navigating and troubleshooting common technology and software issues.
Marlon Joined United Properties in 2025 as a service coordinator. He arrived with solid experience in customer service, property management, and marketing. If you need assistance with either a new or a previous situation, he will be more than glad to help you. Depending on the season, he likes spending time outdoors, going hiking, or simply taking a stroll around town to see what’s new in the city.
Hector began his career in customer service in 2017, gaining valuable experience in client support and communication. In 2021, he transitioned into sales roles, where he developed a strong ability to drive results and build relationships. Since 2023, he has worked in maintenance, IT, and tech support, expanding his skills in troubleshooting, systems support, and hands-on problem-solving. His background combines over eight years of customer-facing roles with a growing expertise in technical support and operations.
Gar Allison joined United Properties as Director of Operations in August 2025. He brings a decade of experience, covering construction project management, supply chain, sales, marketing, and regulatory compliance. Before that, he spent five years as an Engines Sales Representative in Kansas City, MO, shortly after graduating from Davenport University in 2011 with a bachelor’s degree in business management.