Imagine living in a home with no running water, or renting an apartment with ceilings that are caving in and electrical outlets that don’t provide power.
These are just some of the brutal living conditions at the center of a massive lawsuit filed by the city of Detroit. RealToken, a Florida-based blockchain real estate company, has been accused of public nuisance violations that involve hundreds of residential properties in Detroit.
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"This is the largest nuisance abatement lawsuit ever filed by the city of Detroit," Conrad Mallett, corporation counsel for the city of Detroit, shared with the Detroit Free Press.
One RealToken tenant — an older American named Brenda Davis, who’s lived in her apartment for 16 years with only one late rent payment — found herself facing eviction when she stopped paying rent after her water was shut off.
"After being here 16 years, this is what you’re going to do to an elderly person?" said Davis. "It makes no sense. And they should not be able to keep doing this and getting away with it."
What is a blockchain real estate company?
RealToken, or RealT, is a company that allows investors around the world to invest in the U.S. housing market by offering "fractional ownership of Detroit properties represented as digital tokens," according to the lawsuit.
Launched in 2019, the company has garnered more than 65,000 investors who, based on the company’s website, have invested in “fully-compliant, fractional, tokenized ownership" of rental properties. Buying these “representative tokens” gives investors an ownership share in the properties, which includes voting rights and regular payments of rental income.
Despite RealToken being located in Florida, the company’s properties are primarily located in Detroit. RealToken reportedly hired local management companies to support tenants in Detroit and ensure the units are properly maintained. In response to the lawsuit, RealToken blames these management companies for the poor living conditions in its properties.
“These companies were paid hundreds of thousands of dollars to oversee RealToken’s properties, address tenant complaints and make repairs, and maintain each of our properties in accordance with City of Detroit municipal codes,” said RealToken in a statement shared with the Detroit Free Press.
“As it turns out, there are many instances where these goals were not achieved, and each management company, in its own way, stole these funds to the detriment of RealToken and more importantly, the tenants we serve.”
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City officials aren’t buying it
“The landlords are pretty much faceless, the investors sometimes are overseas and the damage is very real,” Detroit City Councilwoman Angela Calloway shared with WXYZ.
That damage has left tenants coping with a host of issues, including rodents, sinks that don’t work, cracks in windows, structural issues and fire hazards. The lawsuit also alleges that RealToken owes hundreds of thousands of dollars in property taxes.
"For years, we’ve seen a pattern that must end," said Mary Waters, an at-large Council Member. “Slumlord and scam artists exploiting Detroit renters, unsafe housing, unreturned security deposits, illegal evictions. These are not just individual cases. They are systemic failures.”
The city filed the lawsuit in Wayne County Circuit Court, alleging violations of health and safety codes as well as local building codes. The lawsuit is also seeking $500,000 in unpaid tickets.
City officials are urging a judge to order that all RealToken rent payments must be put into an escrow account, and that no eviction notices will be sent out until all of RealToken’s properties pass a compliance inspection.
RealToken, however, claims it has not yet been served with a lawsuit. Meanwhile, the company claims in its statement that it’s working on fixing the issue, but warns that "this process cannot happen overnight. It takes time. But we are committed to addressing every issue and finally execute on our original mission."
What rights do tenants have in these situations?
While the lawsuit works its way through the courts, many of the tenants are still suffering from RealToken’s failure to provide a safe living environment. This is why it’s important for tenants to understand their legal rights.
The State of Michigan is very clear about tenants’s rights, requiring landlords to ensure that properties are habitable, which means rented units must have:
- Walls and a roof that are structurally sound
- Hot and cold running water
- A working HVAC system
- Working toilets
- Working plumbing
- A working electrical system
- Safe stairs with railings
- No combustible materials
If a landlord does not make any necessary repairs, tenants can:
- Make repairs themselves and deduct the cost from rent payments
- Withhold rent until the repairs are made
- Terminate the lease
There are also low-cost or even free options in most states for tenants to get legal help with landlord issues. For example, Michigan Legal Help has resources that residents can use to find an advocate. The Consumer Financial Protection Bureau also has a list of all the different resources tenants can use to find legal services in their state.
But before exploring legal options, if you’re struggling with unsafe living conditions in your home, contact your landlord and inform them of the issues. Just remember to document everything during your correspondence.
If the landlord proves to be less than helpful, you can decide whether you want to pay for the repairs yourself and deduct the cost from rent, withhold rent altogether, or seek legal assistance.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
