One of the nation’s largest single-family-home rental companies has agreed to pay nearly $20 million to resolve allegations it made unpermitted renovations across its portfolio in California.
Invitation Homes, which owns 12,000 homes in the state, will pay $8 million to Los Angeles and 34 other cities, $8 million to Blackbird Special Ventures, a San Diego-based business that brought the lawsuit, and $4 million in attorney’s fees, under a proposed settlement filed in federal court Monday.
Blackbird, which is owned by La Jolla entrepreneur Neil Senturia, sued Invitation Homes in 2020, alleging that the home rental company purchased properties and then systematically made renovations without permits, including significant demolitions, electrical and plumbing repairs and swimming pool construction. California law provides third parties with a financial incentive to bring claims on behalf of the state. Blackbird said it discovered the need for permits through its automated technology that analyzed samples of before and after images of Invitation Homes’ rentals.
The practice cost cities permitting fees and put tenants at risk of living in substandard conditions, said Vince McKnight, an attorney with Sanford Heisler Sharp, which represented Blackbird.
“If work is being done without a permit, it’s not being inspected and we don’t know if it’s up to code,” McKnight said. “We don’t know if tenants are moving into a home that’s safe.”
Invitation Homes did not admit wrongdoing in the case and continued to deny the allegations in a statement. It said settling the litigation was “in the best interest of all its stakeholders and allows the company to better focus on its core business operations.”
Under the proposed terms, cities will receive a proportion of the $8 million based on how many relevant homes the company owns within each jurisdiction. The city of Los Angeles is expected to collect $1.5 million; Sacramento is in line for $967,000.
The case is at least the second major legal settlement in California involving Invitation Homes this year. In January, the company agreed to pay $3.7 million to resolve allegations made by Atty. Gen. Rob Bonta that it violated California’s rent gouging laws.
Invitation Homes owns 84,000 properties across the country. Those in California accounted for 17% of the company’s $632 million in rental revenue during the three months that ended March 31, according to its most recent quarterly financial report filed with the U.S. Securities and Exchange Commission. The $3,047 average monthly rent for Invitation Homes properties in Southern California is the highest in its nationwide portfolio, the report said.