Single-family rental giant Invitation Homes was hit with a potential class-action lawsuit in California on Friday over what the plaintiffs claim are excessive and illegal late fees charged to tenants who fall behind on rent.
According to the lawsuit, Invitation Homes charges a late fee of $95, even in cases when rent is only an hour late. In addition to those late fees, the lawsuit alleges that Invitation Homes stacks additional late fees of $95 or more on any accrued balance of late fees, even if the tenant paid their most recent rent on time.
An Invitation spokesperson contacted by Curbed declined to comment on the pending litigation.
While the suit was filed in California, it claims that Invitation Homes’s late fees violate the law in each of the 12 states in which the company does business.
“The penalty is illegal, and thus, void, because it is excessive and bears no relation to any actual damages incurred by [Invitation Homes] when rent or other fees are paid late,” the lawsuit reads. “Some people have been evicted purely as a result of this late rent penalty, and in particular, this penalty stacking practice.”
The suit claims in some cases, Invitation Homes doesn’t incur any actual damage, due to the fact that a slightly late payment doesn’t cause the company financial harm.
Jose Rivera, the plaintiff in the case, paid $2,699 per month in rent at one point, according to the lawsuit. According to the complaint, a $95 late payment would represent a 642 percent annual interest rate on Rivera’s rent payment, which the suit uses to paint late fees charged by Invitation Homes as “fee-gouging.”
With 82,570 single-family units across the country, Invitation Homes is the largest single-family rental company. The rise of corporate single-family landlords came after the 2008 financial crisis, as private equity firms and institutional investors bought single-family homes in bulk out of foreclosure in the years following the housing bust.
These single-family rental home companies have amassed north of 200,000 homes, but they remain a small slice of the 14 million single-family rental units in the United State. The bulk of single-family rental owners remain “mom and pop” operations.
Invitation Homes specifically was privately owned by private equity giant Blackstone prior to going public in 2017. American Homes 4 Rent, the second largest single-family rental company with 51,840 homes, has also gone public. Plaintiffs in the lawsuit cite investor demand as providing undue influence on the business practices of the companies.
“The residential rental industry has recently undergone a massive transformation and consolidation out of the hands of small and family landlord business… and into the large arms of private equity, hedge fund, and other Wall Street giants whose allegiances run solely to their investors, and whose motivations are driven purely by stock price and by showing and growing those all-important quarterly earnings,” the suit reads.