Whistleblower suit based on AI accuses landlord of cheating SoCal cities

A Dallas-based landlord has been accused in court of buying thousands of cheap homes in Southern California after the Great Recession, fixing them up, then bilking 18 cities and counties out of millions of dollars in unpaid permit fees and property taxes.

Blackbird Special Project, owned by La Jolla businessman Neil Senturia, filed the whistleblower lawsuit against Invitation Homes in 2020 based on software that used artificial intelligence to confirm the alleged fraud, the San Bernardino Sun reported. The entity could be in line for a significant reward if the suit leads to recoveries for local governments.

The civil complaint was unsealed by a San Diego judge late last year.

The lawsuit alleges Invitation Homes obtained building permits for less than 7 percent of the more than 6,700 single-family homes it owns in San Diego, Sacramento, Los Angeles, Moreno Valley, Riverside, Compton, Temecula, Palmdale, Lancaster, San Bernardino, Vallejo, Fontana, Murrieta, Fairfield, Perris, Yucaipa, Corona, and Rialto.

The complaint filed in a San Diego County court lists 18 cities as plaintiffs.

The vast majority of the Invitation Home renovations required permits – for demolishing and building sections of single-family homes, installing and demolishing pools, and significantly altering electrical work – that were not obtained, according to the civil complaint.
“Once the single-family homes were renovated without the required permits, Invitation Homes rented them to tenants who were unaware of the unpermitted and potentially unsafe renovations,” the lawsuit said.

Invitation Homes declined to discuss the lawsuit.

“While we cannot comment on pending litigation, we believe the allegations are without merit and we intend to vigorously defend the company,” a company spokesperson said.

The business model for the scam was simple, according to the lawsuit.

Invitation Homes bought devalued properties across the U.S. after the 2007-08 financial crisis, amassing more than 12,000 single family homes in California. It then spent about $25,000 to renovate each home before renting them out.

The alleged fraud, according to the complaint, occurred when the company ignored permitting requirements to avoid permit fees – and pushed properties into the rental market as fast as possible to avoid property tax increases.

As a result, Invitation Homes cheated California counties and cities out of millions of dollars, the complaint alleges.

Blackbird, in conjunction with Deckard Technologies, used artificial intel and “lookback” technology to access images of homes from multiple listing services to compare them with images from rental advertisements after renovations, the suit states. It includes 14 before-and-after photos of homes, mostly in Riverside County, purported to have been purchased by Invitation Homes and renovated without obtaining necessary permits.

In Moreno Valley, roughly 20 percent of homeowners have pulled permits for renovations since 2012, Invitation Homes pulled permits for less than 4 percent percent of its 526 properties in the city, the suit says.

The complaint alleges Invitation Homes has avoided safety oversight from city building inspectors, potentially putting thousands of tenants at risk.

[SBS] – Dana Bartholomew

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