An apartment building with fire damage. A home without heat or smoke detectors. Multiple properties with broken windows.
Over on the east side, a Detroiter living in her home without running water for two months, forcing her to survive off of bottles of water. Another tenant living upstairs in the same apartment complex with no hot water in her kitchen, electrical sockets that don’t work and gaps in her windows. Outside of their home, a backyard door that appears boarded shut.
These are among the properties, and living conditions, at the center of a sprawling lawsuit filed by the city of Detroit on July 2 against Real Token, a Florida-based blockchain real estate company; its co-founders, brothers Remy Jacobson and Jean-Marc Jacobson, and 165 affiliates, for public nuisance violations involving more than 400 residential properties in Detroit.
“This is the largest nuisance abatement lawsuit ever filed by the city of Detroit,” said Conrad Mallett, corporation counsel for the city of Detroit, speaking at a news conference on the city’s west side near one of the many properties cited in the suit.
At issue: Real Token, or RealT, is operating a cryptocurrency venture in Detroit, involving dozens of limited liability companies and related entities, by offering international investors “fractional ownership of Detroit properties represented as digital tokens,” according to the suit. The city of Detroit, in its complaint, alleges that its tenants — Detroit residents — are paying the price with poorly maintained rental properties and unsanitary and unsafe conditions. The city’s lawsuit follows an Outlier Media investigation published earlier this year about the company.
“Behind the high tech language lies a deeply familiar problem in this city, and that is neglected properties … unresponsive management, and Detroit families, many of them single mothers, left to live in unsafe and unhealthy conditions. Tenants have reported persistent mold, broken plumbing, caved-in ceilings and a total lack of basic maintenance, yet their rent is still being collected,” said District 2 Council Member Angela Whitfield-Calloway.
On its website, Real Token says “for the first time, investors around the globe can buy into the US real estate market through fully-compliant, fractional, tokenized ownership.” Since 2019, the company says it has garnered more than 65,000 registered investors. Ownership of property is spread out across “representative tokens” and owners “can collect revenue from rent, and vote on property decisions,” according to the company’s website. Each property has a management company that “sources tenants, collects rent, and manages repairs, so the diverse group of RealToken owners don’t have to.”
In a statement, RealToken, laid the blame on management companies it hired for the properties.
“Since RealToken has entered the Detroit market, we have been committed to the goal of providing safe, affordable housing for our tenants, and playing a supporting role in revitalizing Detroit’s neighborhoods. Unfortunately, we have been one of many victims in Detroit of several unscrupulous property management companies. 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. 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,” according to a statement from the company provided to the Free Press on July 3 issued through Cadence, a Detroit-based communications firm.
The statement went on to say: “We took over all the properties at once and started addressing blight violations, administrative filings, servicing maintenance calls and conducting full rehabs. We have made complete repairs to over several dozens of properties, addressed hundreds of blight tickets, and have contractor teams in the field every day addressing each disgruntled tenant and city citation in turn. This process cannot happen overnight. It takes time. But we are committed to addressing every issue, and finally execute on our original mission.”
Real Token has not been served a lawsuit, according to the company, and reserved further comment.
‘They don’t repair anything’
Brenda Davis has lived in her apartment on the city’s east side for 16 years and has only ever been late on her rent once, she said. But on April 29, after she paid the month’s rent, her water stopped running. She said she wrote a letter to her property manager a day later explaining her situation.
“They didn’t seem to care because if they did, they would have had the water turned back on,” 68-year-old Davis said.
She has had to buy water and rely on family and a neighbor. Davis, who uses a walker, hasn’t been able to take a bath with epsom salt to relieve pain in her knees and hip. She has had to pour water into her toilet to flush it. Standing with a Free Press reporter and photographer on July 2, she lifted the knob to her bathroom faucet and nothing came out.
“That’s what hurts the most. After being here 16 years and this is what you’re going to do to an elderly person? It makes no sense. And they should not be able to keep doing this and getting away with it,” she said.
Davis, who hasn’t paid rent since her water stopped flowing, received an eviction notice directing her to move out by July 14 or her landlord may take her to court to evict her, according to paperwork she showed the Free Press, which published a story on freep.com the morning of July 3, detailing the struggles in her home.
On July 3, Davis said water ran through her taps again for the first time in two months but she said she doesn’t know why or how. She said no one came into her home to fix the water. Five weeks ago, maintenance from her property management company came by her apartment, and went into the basement, she said, but she still had no water after that visit.
Upstairs at 63-year-old Minnie Pearl Pratt’s place, she said her bathroom sink didn’t work either, but the tub did, as of July 2. The kitchen sink ran cold water. She boils the water. There’s a large crack in a back window and a board holds a door closed.
“It’s too much stress on me,” she said. The Free Press reached out to Pratt July 3 for an update on her water but hasn’t heard back.
Pratt, who has had three strokes and is no longer able to work, is frustrated and said she feels unheard and pushed out as a senior.
The apartment the pair live in is owned by Michigan Real Token II LLC, among the defendants in the suit. The property does not have a certificate of compliance, as required by the city to indicate it is up to code, and is behind more than $8,500 in property taxes, according to city and county records.
‘Systemic failures’
Detroit City Council members expressed their outrage over the conditions renters were living in and the negligent landlords.
“They feel that they can do this to folks in the most vulnerable situation,” said Pro Tem James Tate.
At-Large Council Member Mary Waters said bad landlords have gotten away with too much.
“For years, we’ve seen a pattern that must end. Slumlord and scam artists exploiting Detroit renters, unsafe housing, unreturned security deposits, illegal evictions. These are not just individual cases. They are systemic failures,” Waters said.
The city of Detroit’s suit, filed in Wayne County Circuit Court, alleges that the cited properties repeatedly violated local building, health and safety codes; the company uses a web of LLCs and shell companies to evade responsibility, and the negligence has led to rodents, structural decay, fire hazards and criminal activity, according to a news release.
None of the 408 properties — occupied or vacant — at the center of the litigation have a certificate of compliance, according to the 31-page complaint, which also alleges hundreds of thousands of dollars in unpaid blight violations. The defendants owe hundreds of thousands of dollars in outstanding property taxes, too, the suit says.
“We want our $500,000 in tickets. We want to be paid that which they owe,” Mallett said.
The city of Detroit wants all of the properties to pass a compliance inspection, leading to a certificate of compliance, he said. Until then, the city is asking the judge to order the defendants to notify tenants that rent must be paid into an escrow account, according to the suit.
“We’re requesting the court to order, as well, that no evictions take place while this process is going on,” Mallett said.
Contact Nushrat Rahman: nrahman@freepress.com. Follow her on X: @NushratR.
This article has been updated to include comments from Real Token.
This article originally appeared on Detroit Free Press: Detroit sues blockchain real estate firm that owns rentals with hundreds of violations
Reporting by Nushrat Rahman, Detroit Free Press / Detroit Free Press
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