How to Handle Security Deposit Returns – Southwest Michigan Property Management Advice

When landlords are collecting a security deposit on a rental property in Southwest Michigan, it cannot be more than the equivalent of one-and-a-half month’s rent. This means that if you charge $2,000 in rent, your security deposit cannot exceed $3,000.

Collecting and holding the security deposit comes with its own set of requirements and laws. However, the real mistakes are often made when the security deposit is returned. Many landlords don’t understand the difference between tenant damage and wear and tear. Or, they miss the very important deadlines that are important in returning any part of the deposit to the tenants.

Today, we’re sharing some tips on how to handle these security deposit returns and avoid some common and potentially expensive mistakes.

Deadlines for Returning Michigan Security Deposits

Michigan law requires that you return the tenant’s security deposit with a Notice of Damage within 30 days of the tenant moving out. The Notice of Damage is an itemized statement that reflects any deductions that were made from the deposit and kept by the landlord.

There is an element of tenant responsibility here. Your tenant is required to provide a forwarding address within four days of leaving. If they don’t, you aren’t required to provide a Notice of Damage, but you do have to return any remaining money in the security deposit. To protect yourself, we recommend sending the Notice of Damage as well, even if you don’t have a forwarding address. You can use the tenant’s last known address.

Reasons to Withhold a Security Deposit

You can charge the deposit for any repairs that are necessary to get the property back into move-in ready condition. You can also charge for cleaning. However, you cannot charge the deposit for normal wear and tear or routine maintenance issues that you’d be responsible for during the course of the lease. You can charge the deposit for unpaid rent or past due utilities. If a key was not returned, you can charge for that.

However, those small nail holes in the wall and scuff marks from furniture are wear and tear. If you’re going to charge for damage, it needs to be due to the tenant’s neglect, abuse, or misuse. Make sure you can document how it differs from general wear and tear.

How to Handle Security Deposit Disputes

You need to make sure you are careful and thorough with your documentation. A good move-in inspection and a move-out inspection with a lot of photos and notes will demonstrate exactly what your property looked like before a tenant moved in and how that condition may have changed after the tenant moved out.

If your tenant disagrees with the itemized statement of deductions, the dispute needs to be made within seven days of receiving the Notice of Damage. Your tenant may also initiate a small claims court action against you. Try to work out any differences before it escalates to a legal matter. You don’t want to find yourself in court. Take a look at your documentation together and see if you can come to an agreement about whatever was deducted. You don’t want to lose money, but you also don’t want to find yourself in front of a judge. Think about whether the $100 charge your tenant is disputing is worth your time and effort.

We can help you with security deposit returns and disputes. Contact us at Real Property Management Southwest Michigan for more information.