Michigan Landlords Must Now Offer At Least One Fee Free Way To Pay Rent And Let Renters Get Security Deposits Back Electronically

If you rent your home in Michigan, a pair of new state laws could put a little money back in your pocket every month and speed up the day your security deposit comes home. Attorney Steve Lehto, who runs the YouTube channel Steve Lehto, walked through the changes and what they mean for both sides of the lease.

A video cover about landlords making it easier to pay rent next to a modern apartment building

He starts by explaining why he considers renting a consumer protection issue. A landlord and a tenant are in a transaction, he says, and the tenant is a consumer. Some consumer laws treat renting differently from a merchant selling a product, but he believes landlord and tenant matters belong under the big umbrella of consumer protection.

The new rules came out of a bipartisan set of bills passed in Lansing, and the attorney says they change how renters pay rent and how they get deposits back.

At Least One Way To Pay Rent With No Fee

The first change targets the extra charges that often get tacked onto certain ways of paying rent. Under the new law, landlords must give tenants at least one way to pay rent without an added fee. If paying online comes with a charge, the landlord has to offer another option that does not.

Lehto says he has talked to people who told him that, depending on how they pay, rent costs them more because of a transaction fee. He acknowledges that an individual charge may not look large. But he points out the math: a fee that shows up every month gets multiplied by 12 each year, and it adds up.

The executive director of the Saginaw Community Action Center made the same point, as Lehto relays it. People are living paycheck to paycheck, he said, and rent is supposed to be about 30% of a person’s income, so fees stacked on top can pinch over the course of a month. The director also said processing fees of $15 to $45, even up to $50, can be what someone would otherwise put in their gas tank.

Lehto jokes that $50 will fill most of a tank, depending on what kind of tank you have, and then makes the serious point that small fees land hardest on people with the smallest cushions.

Security Deposits Can Come Back Electronically

The second change deals with the deposit. Renters can now receive their security deposit back electronically, through direct deposit or another online transfer, instead of waiting on a check in the mail.

Lehto explains why that matters. A typical lease might run 12 months at a set rent with a security deposit. At the end of the tenancy you tell the landlord you are moving out, and then the landlord has about 30 days, or some similar stretch, to return your money. In his experience, landlords routinely use every last second of that window, because the money is sitting in a bank account somewhere. Getting it through a direct transfer removes the mail delay and the hassle of cashing a check.

He adds that the rules say there has to be a way to allow a direct transfer or direct deposit if the tenant has a bank account, which he suspects most people do.

A Related Change For Insurance Shoppers

Lehto also mentions another new law from the same package. It stops insurance companies from using price optimization, which is the practice of charging someone more based on how much the company believes they are willing to pay. He notes this is not directly about landlords and tenants, but it is meant to ease costs for consumers.

What Landlords Can Still Do

The attorney is careful to explain that the law does not ban fees altogether. A landlord may still offer a more convenient option that comes with a convenience fee, so long as at least one fee free way to pay is available. That, he says, does not break the law.

He draws on his own experience as a seller. He sells books and takes payments through Square, which keeps a few points of every sale. He says he understands that accepting cards costs a merchant money, and he is glad to pay it, because the money lands straight in his bank account instead of arriving as wads of cash and checks he has to carry to a branch. After one multi-city book tour, he recalls feeding crumpled bills and checks into an ATM, and says he would gladly have given up a few points for the convenience.

His view is that a convenience is worth something, and offering it is fine. The issue is when a tenant has no choice. If your rent is $1,000 or $500, that should be your rent, he says, and a landlord who wants to offer a faster system for a couple of extra dollars can do so as an option.

What Renters And Landlords Should Do Now

Tenants: check your lease and your landlord’s payment portal. If every method carries a fee, ask about the free option the law now requires.
Tenants: when you give notice, ask to receive your deposit by direct deposit or an online transfer, and keep a copy of your request.
Landlords: review how rent is collected. Lehto says a Michigan landlord may have to change how they conduct business.
Everyone: save written records of payments and move-out dates so any dispute can be settled quickly.

Lehto sums it up this way. If you are a landlord in Michigan, you may need to adjust. If you are a tenant, there is a good chance you will save some money. And since both sides of the aisle agreed on the bills, the attorney expects the new rules to stick around.

Willow and Hearth