Rental companies sue over Detroit inspection ordinance

Francis X. Donnelly and Christine MacDonald
The Detroit News

Two rental property companies have filed a federal lawsuit against Detroit challenging the city’s rental inspection ordinance, saying it violates their rights against “unreasonable searches and seizures.”

MS Rentals, a landlord in Gibraltar, and Garner Properties & Management, a Taylor-based property management company, argued the ordinance violates property owners’ rights by allowing city inspectors to enter their property without a warrant.

They said the ordinance also coerces property owners to allow the inspections because, if they refuse, they could face fines, liens, criminal charges and denial of a certificate of compliance. There is no venue for landlords to object to a city inspection and no way the city can get a warrant for one, the lawsuit alleges.

“Plaintiffs and those similarly situated are denied their constitutional right to the use and income generated from their real property if they fail to permit the City’s warrantless searches and as such have been damaged,” the lawsuit reads.

Under current law, housing units are supposed to be registered and have passed city inspections by obtaining a certificate of compliance before they can be rented out. City officials say they have let most landlords ignore the rules for more than a decade but have pledged a crackdown.

Detroit officials said Monday that their rental inspection regulations don’t violate landlords’ constitutional rights.

“Rental property owners have a particular obligation to ensure that the homes they rent are safe for families,” said Dave Bell, director of the city’s Buildings, Safety Engineering & Environmental Department, in an emailed statement. “Like virtually every city in the country, Detroit requires periodic inspections to ensure that property owners abide by these requirements. The United States Supreme Court has repeatedly confirmed that such laws are constitutional. We are confident the court here will do the same.”

Aaron Cox, an attorney for the property companies, said he’s involved in at least four similar lawsuits filed against Metro Detroit communities that are pending. In the case against Detroit, they are seeking an injunction from a federal judge to prevent the city from continuing to enforce the ordinance.

MS Rentals and Garner Properties also want to turn their legal complaint into a class-action lawsuit on behalf of all Detroit landlords who paid rental registration fees or those who have been denied a certificate of compliance since 2012.

They argued the city is more interested in raising money through the ordinance than in preserving the safety of residents. They said the city has wrongfully collected “millions of dollars in unlawful registration and inspection fees.”

The two companies are asking for an unspecified amount in damages and to be reimbursed for their attorney fees.

MS Rentals, which owns property at 9224 Fielding, said a city official entered the property without permission in June 2014. At the time, the property was vacant and not registered as a rental property, according to the lawsuit.

MS Rentals was issued a ticket for failing to obtain a certificate of compliance and had to pay a fine, it said.

Garner Properties, which owns property at 14920 Faust, said the site received a ticket for failing to obtain a certificate of compliance in September 2015, according to the lawsuit. Garner Properties said the only reason it received a ticket was because it refused to allow the city to enter the property for inspection.

The company challenged the ticket and it was dismissed, according to the lawsuit.

Wayne State University law professor Peter Henning said, in general, the federal Supreme Court had upheld warrantless searches of “highly regulated” businesses by government, such as restaurant inspections, when penalties are civil infractions. But law enforcement needs warrants to enter properties when criminal charges could result.

In 2016, just 4,174 Detroit addresses were registered and inspected, in a city the U.S. Census Bureau estimates as having 140,000 rental units.

As part of a year-long investigation published Oct. 5-6, The News reported that in 2015, only 1 of every 13 eviction cases was filed on an address legally registered with the city.

The News found families facing eviction in homes that were never inspected by the city and had numerous problems: lack of heat in the winter, hazardous electric systems, missing windows, infested with mice and one with a sewage-filled basement.

The City Council moved in late October to update its rental regulations, including enacting rules that stop landlords from collecting rent if they haven't passed city inspections. That is set to take affect in early 2018 but city officials haven’t announced an exact time line.