Single-family housing landlord agrees to pay California cities $20M over unpermitted work claims

One of the largest companies buying up and renting out suburban homes has agreed to pay nearly $20 million to a long list of California cities over claims that renovations in their properties were routinely unpermitted.

The settlement stems from a lawsuit against Invitation Homes alleging the company did not acquire necessary permits before upgrading houses in preparation to rent them out to tenants.

Why it matters

As a result of this unsanctioned work, the lawsuit claims, cities lost out on substantial revenue through permitting fees — and the safety of tenants was jeopardized due to potentially faulty renovations.

“These companies are buying up suburban America,” said Vincent McKnight, one of the attorneys with Sanford Heisler Sharp who brought the case forward. “If they're going to be involved in that business then they need to do it right, do it properly and protect the renters who are going to rent these homes in order to take advantage of a suburban lifestyle.”

Invitation Homes, which walks prospective renters through its maintenance practices and renter responsibilities on its website, issued a news release on Monday admitting no wrongdoing.

“The company has maintained that the complaint was without merit since it was filed,” the statement reads. “However, the company believes reaching this settlement is in the best interest of all its stakeholders and allows the company to better focus on its core business operations.”

How the case began

The case was originally filed in San Diego in 2020 by Blackbird Special Project LLC, a venture fund owned by La Jolla businessman Neil Senturia. Through unrelated work, the plaintiff discovered that a number of renovated properties owned by Invitation Homes appeared to lack permits for various upgrades.

McKnight said extensive research revealed that Invitation Homes properties in more than 30 California cities had apparently undergone unpermitted renovations. The alleged unauthorized work included plumbing and electrical fixes, demolitions and swimming pool upgrades.

“Permitting fees can range anywhere from a couple hundred bucks to $2,000 or $3,000,” McKnight said. “The cities and the counties are losing a stream of revenue.”

Company has paid to settle previous claims

The settlement agreement still needs to be approved by a judge, a process that could take a few months according to McKnight.

If finalized, the settlement would include payments to cities across California. The city of L.A. would receive about $1.52 million, Riverside would get close to $418,000, and Lancaster would receive close to $338,000, just to name a few of the recipients.

This is not the first time Invitation Homes has found itself in legal trouble over its business practices in Southern California. The company recently agreed to pay $3.7 million over claims it routinely raised rents illegally on California tenants.