How Much Deposit Can a Contractor Ask For in Michigan?
Michigan does not cap the deposit by percentage, but abandoning a job, diverting project funds, or failing to account for a homeowner’s money are all grounds for discipline.
Michigan protects a homeowner's deposit through its licensing rules rather than a percentage cap. Under the Occupational Code, a licensed residential builder who abandons a job without legal excuse,1 who fails to account for money that belongs to others,2 or who diverts funds received for a specific project3 is exposed to disciplinary penalties. This page explains those grounds, because in Michigan they are what stands behind a deposit.
Abandonment and mishandling a homeowner’s money
The Occupational Code lists conduct that exposes a licensee to penalties. Abandonment without legal excuse of a contract, construction project, or operation undertaken by the licensee is one of them.1 A contractor who takes a deposit and walks off the job falls squarely within it.
Handling the money is covered too. Failure to account for or remit money coming into the person's possession that belongs to others is a ground for discipline.2 A deposit paid for your job is money that belongs to you until it is earned, and failing to account for it is what the provision reaches.
Diversion of project funds
Michigan also targets moving the money elsewhere. Diversion of funds or property received for the prosecution or completion of a specific construction project or operation is a ground for disciplinary penalties.3 Using your deposit to finish someone else's job is the classic diversion the rule is aimed at.
The practical takeaway in Michigan is to confirm the builder is licensed, keep the deposit proportionate, and document what you paid, since the state's protection is disciplinary action against the license rather than a statutory deposit ceiling.
Sources
Under Michigan's Occupational Code, a licensed residential builder or contractor who abandons a contract or construction project without legal excuse is subject to disciplinary penalties.
In Michigan, a licensed residential contractor's failure to account for or remit money coming into the contractor's possession that belongs to others is a ground for disciplinary penalties.
In Michigan, the diversion of funds or property received for the completion of a specific construction project is a ground for disciplinary penalties against the licensee.
Frequently asked questions
- Does Michigan cap how much deposit a contractor can ask for?
- Michigan does not set a percentage cap. It protects homeowners by making abandonment, diversion of project funds, and failing to account for others’ money grounds for disciplinary action against the license.
- What can I do if a Michigan contractor takes my deposit and abandons the job?
- Abandonment without legal excuse is a ground for disciplinary penalties under the Occupational Code, and you can complain to the state licensing authority. Discipline is separate from recovering the money.
- Is diverting my deposit to another job a violation in Michigan?
- Yes. Diversion of funds received for a specific construction project is a ground for disciplinary penalties against a licensed builder.
Last reviewed August 3, 2026
This page is general information about state law, not legal advice. Laws change, and how they apply depends on the facts of your situation.