Property Management Laws And Regulations In Michigan

Michigan regulates third-party property management through several authorities at once, and the rules that matter most to a management company are the ones covering your license, your client trust accounts, and the money you hold on behalf of owners and tenants. This guide covers those rules for professional managers, with the statute or agency regulation behind each one.

Everything below is sourced to Michigan's own statutes, agency rules, and court materials rather than to secondhand summaries. Specific dollar amounts and deadlines do change; the citations do not, so you can always open the authority and confirm the current text before you act on it.

Licensing Requirements For Property Managers

Michigan's real estate licensing statute defines a real estate broker to expressly include anyone who engages in property management as a whole or partial vocation for compensation, which sweeps in third-party property management companies far more broadly than in Maryland or Massachusetts. Michigan's exemption list for brokerage licensing does not include an equivalent carve-out for regularly employed managers of a single property.

• Michigan's Occupational Code defines a "real estate broker" to include any person who, with intent to receive a fee or compensation, engages in property management as a whole or partial vocation, in addition to selling, leasing, or renting real estate for others. (Mich. Comp. Laws § 339.2501(u))
• "Property management" is defined as leasing or renting, or offering to lease or rent, real property of others for a fee under a written property management employment contract that sets out the broker's duties and the handling of property management funds. (Mich. Comp. Laws § 339.2504)
• Michigan's real estate licensing exemptions cover owners and lessors acting for themselves, attorneys acting as attorneys, court-appointed fiduciaries, licensed auctioneers, and certain mortgage professionals, but do not include a general carve-out for salaried, non-broker employees who manage rental property for a fee-based third party. (Mich. Comp. Laws § 339.2503)
• An applicant for a Michigan real estate broker's license must complete 90 hours of approved prelicensure classroom courses, including 9 clock hours on civil rights and fair housing law. (Mich. Comp. Laws ch. 339, art. 25)

Client Trust Account Rules

Michigan brokers who handle property management funds must run them through a dedicated property management account, governed by a written employment contract, with strict anti-commingling rules, a cap on the broker's own money in the account, and a duty to account fully to the client. Sales-transaction trust funds are subject to a parallel, shorter deposit deadline.

• All property management duties, responsibilities, and activities performed by a broker and the broker's agents must be governed by, and performed in accordance with, a written property management employment contract with the client. (Mich. Comp. Laws § 339.2512c)
• A broker engaged in property management must maintain a separate property management account, may earn interest on it unless the client contract says otherwise, and must render a full accounting to the client and remit money strictly according to the property management contract. (Mich. Comp. Laws § 339.2512c)
• A broker or designated employee engaged in property management may be a signatory on the property management account, and the broker must keep records of every deposit and withdrawal, including dates and parties involved, subject to LARA inspection. (Mich. Comp. Laws § 339.2512c)
• A broker may not deposit advance payments belonging to others into the broker's own business or personal account, or commingle those funds with the broker's own money; for sales transactions, trust money must go into a separate custodial account no later than 2 banking days after an accepted offer. (Mich. Comp. Laws § 339.2512)
• A broker may keep no more than $2,000 of the broker's own money in each trust or escrow account, solely to cover bank service charges and minimum balance requirements. (Mich. Comp. Laws § 339.2512)

Trust account rules are where Michigan management companies get into trouble fastest, because a shortage is a licensing problem and not just a bookkeeping problem. The habits that keep you clean are the boring ones: deposit on time, never let operating money and client money mix, reconcile every account every month, and keep a per, property record you could hand to an auditor without preparing it first. Our guide to preparing for a trust account audit walks through what examiners actually ask for.

Security Deposit Rules

Michigan caps security deposits at one and a half months' rent, requires the funds be held at a regulated financial institution (or bonded), and imposes a documented move-in inventory process plus a 30-day post-move-out deadline for an itemized damage list, but does not require the landlord to pay interest on the deposit.

• A Michigan landlord may require a security deposit for each rental unit, but it may not exceed one and one-half months' rent. (Mich. Comp. Laws § 554.602)
• The security deposit must be deposited in a regulated financial institution, or alternatively the landlord may secure the deposit amount with a cash or surety bond filed with the Michigan Secretary of State; the statute does not require interest to be paid to the tenant. (Mich. Comp. Laws § 554.604)
• Within 14 days after a tenant takes possession, the landlord must give written notice of the landlord's name and address and the name and address of the financial institution or surety holding the deposit, along with notice of the tenant's duty to provide a forwarding address within 4 days of moving out. (Mich. Comp. Laws § 554.603)
• At the start of a tenancy the landlord must give the tenant 2 blank copies of a commencement inventory checklist of landlord-owned items; the tenant has up to 7 days to document the unit's condition and return one copy. (Mich. Comp. Laws § 554.608)
• Within 30 days after a tenant moves out, the landlord must mail an itemized list of damages claimed against the deposit, along with a check or money order for any remaining balance; the notice must warn in 12-point boldface that the tenant must respond in writing within 7 days or forfeit the claimed amount. (Mich. Comp. Laws § 554.609)

Lease Agreements And Required Disclosures

Michigan's core lease-related mandate is the implied covenant, applicable to nearly all residential leases, that the premises and common areas be fit for their intended use and kept in reasonable repair, a term that generally cannot be waived on leases of a year or less.

• Every residential lease is presumed to include a covenant that the premises and all common areas are fit for the use intended by the parties, and that the landlord will keep the premises in reasonable repair and comply with applicable health and safety laws, except for damage caused by the tenant's own negligence or willful conduct. (Mich. Comp. Laws § 554.139)
• The parties may only modify these covenants of fitness and repair if the lease term exceeds one year. (Mich. Comp. Laws § 554.139)

Entry Notice And Tenant Privacy

Michigan's Landlord and Tenant Relationships Act does not set a specific statutory hours-notice requirement for routine, non-emergency landlord entry; entry practices are governed primarily by lease terms and general common-law reasonableness rather than a fixed statutory notice period.

• Michigan's landlord-tenant statute (Act 348 of 1972) is centered on security deposits, inventory checklists, and habitability, and does not contain a specific provision fixing a required number of hours' notice before a landlord may enter an occupied rental unit for routine purposes. (Mich. Comp. Laws §§ 554.601-554.616)

Rent, Late Fees, And Other Charges

Michigan law preempts local rent control ordinances statewide, leaving rent-setting to the market and lease terms; the state has not enacted a general statutory cap on late fees for residential rent.

• A local unit of government may not enact or enforce an ordinance controlling the amount of rent charged for leasing private residential property; this does not restrict a local government from managing residential property in which it holds its own property interest, or from offering voluntary incentive programs to expand affordable rental supply. (Mich. Comp. Laws § 123.411)

Fee income is also taxable income, and how you record management fees, late fees, and pass, through charges affects both your compliance position and your books. See our guide to Michigan property management taxes for the reporting side.

Fair Housing Obligations

The Michigan Department of Civil Rights enforces the state's fair housing protections, which under the Elliott-Larsen Civil Rights Act extend to several classes beyond the federal Fair Housing Act, including source of income.

• The Michigan Department of Civil Rights enforces housing discrimination protections and operates a fair housing hotline; complaints can be filed through the Department's enforcement division. (Mich. Comp. Laws § 37.2502 (Elliott-Larsen Civil Rights Act))
• Michigan's Elliott-Larsen Civil Rights Act and Persons with Disabilities Civil Rights Act together protect against housing discrimination based on race, color, national origin, religion, sex, familial status, and disability, plus 5 additional categories not named in the federal Fair Housing Act: source of income, age, marital status, sexual orientation, and gender identity or expression. (Mich. Comp. Laws §§ 37.2101 et seq., 37.1101 et seq.)

Habitability And Safety Duties

Michigan's habitability duty flows from the statutory covenants of fitness and repair, giving tenants a basis to demand repairs and, in serious cases, to seek remedies through the courts.

• A residential landlord covenants that the premises and common areas are fit for their intended use and that the landlord will keep the premises in reasonable repair and comply with applicable health and safety codes, unless the disrepair is due to the tenant's own negligence or willful conduct. (Mich. Comp. Laws § 554.139)

Eviction Basics

Michigan evictions proceed as summary proceedings, most commonly in district court, and require a written demand before filing; the standard notice period for nonpayment is 7 days.

• A landlord may bring summary proceedings to recover possession after a tenant fails or refuses to pay rent due, following a written demand for payment giving the tenant 7 days to pay or vacate. (Mich. Comp. Laws § 600.5714)
• A written demand for possession or payment used to begin summary proceedings must state the address of the premises, the reason for the demand, the time allowed to act, the amount owed if based on nonpayment, and be dated and signed. (Mich. Comp. Laws § 600.5716)
• Public housing tenants and mobile home park residents receive enhanced protection under Michigan's summary proceedings statute, which permits their eviction only for just cause as defined by applicable regulation. (Mich. Comp. Laws § 600.5714)

Staying Compliant Without Guessing

Most Michigan compliance failures are not decisions, they are drift: a deposit that sat too long, a reconciliation that got skipped in a busy month, a lease template that never got updated after a statute changed. Build the calendar first. Monthly trust reconciliations, an annual review of your lease and disclosure packet against current statutes, and a documented process for deposits and refunds cover the large majority of what an examiner will ask about.

This guide is a starting point for professional managers, not legal advice. For a specific dispute, a novel fact pattern, or anything with real money at stake, work with a Michigan attorney, and confirm the current text of any statute cited above with the Michigan Department of Licensing and Regulatory Affairs (LARA), Bureau of Professional Licensing or the Michigan legislature.

Sources

Every fact above is drawn from one of the official sources below.

• Mich. Comp. Laws § 339.2501(u), Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 339.2504, Michigan House Fiscal Agency, Legislative Snapshot on the Occupational Code
• Mich. Comp. Laws § 339.2503, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws ch. 339, art. 25, Michigan LARA, Real Estate Individual Broker Licensing Guide
• Mich. Comp. Laws § 339.2512c, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 339.2512, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 554.602, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 554.604, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 554.603, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 554.608, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 554.609, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 554.139, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws §§ 554.601-554.616, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 123.411, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 37.2502 (Elliott-Larsen Civil Rights Act), Michigan Department of Civil Rights
• Mich. Comp. Laws § 600.5714, Michigan Legislature (legislature.mi.gov)
• Mich. Comp. Laws § 600.5716, Michigan Legislature (legislature.mi.gov)