National rental home provider Invitation Homes has agreed to pay nearly $20 million to settle a lawsuit brought forward on behalf of the city of San Diego in California. The settlement was reached earlier this month and the U.S. The District Court for the Southern District of California is expected to approve the settlement amount of $19,992,900.

Invitation Homes is a national leader in the rental home space and specializes in offering single-family homes and managing rental agreements. The company promotes itself as offering high-quality housing in desirable locations throughout the nation. It touts itself as offering exceptional resident experiences and fostering a sense of community in the areas it serves.

Despite its promising mission statement, cities throughout California claim that Invitation Homes expanded on their mission without proper permitting. The 2020 lawsuit argues that Invitation Homes conducted renovations and upgrades to properties without obtaining the proper permits. Home renovations included anything from additions to homes, basement renovations, and additions of pools.

In all states, municipalities have different rules regarding home improvements and how they should be done. However, permits are required for most major renovations to ensure that work is done in a manner that's up to code.

According to the lawsuit, because Invitation Homes skirted this critical piece of the renovation process, cities lost out on substantial revenue they would normally generate through permitting fees. More importantly, according to claims in the lawsuit, the safety of tenants was at risk because of potentially faulty renovations that may not have been up to industry standards.

The lawsuit argued that Invitation Homes violated the California False Claims Act by circumventing the need for these permits. In turn, the company also avoided other fees and increased tax assessments because the improved property renovations were not properly documented and reflected in the recorded values of the homes.

Invitation Homes owns over 80,800 homes in the United States. Over 12,000 of those homes are located in California, with the greater Sacramento area and Southern California being hotspots for this rental company.

The lawsuit was initially filed by Blackbird Special Ventures. This San Diego-based company is owned by local resident Neil Senturia. Senturia filed the lawsuit In 2020 under a California law that allows third parties to file lawsuits on behalf of the state for a financial incentive. Blackbird Ventures shares that it discovered the need for permits through automated technology that sampled permit data and compared them to before and after images of properties, including properties owned by Innovation Homes.

During negotiations, Blackbird Ventures asked for 50% of settlement proceedings, averring that it conducted a four-year investigation into the matter.

Vince McKnight, a partner at Sanford Heisler Sharp and lead attorney for Senturia, shared, “Invitation Homes deprived many California governments of much-needed funds by renovating rental properties without securing the permits and inspections they require.” McKnight adds, “The company’s actions had both long- and short-term adverse financial consequences for these cities.”

As part of the settlement agreement, Invitation Homes will pay Los Angeles and 34 other cities $8 million. Another $8 million will go to Blackbird Special Ventures, and $4 million will go to attorney's fees.