On May 30, 2017, Relman, Dane & Colfax, PLLC filed a class action housing discrimination lawsuit on behalf of four individuals and the Fair Housing Center of Central Indiana against Rainbow Realty Group, Inc., Empire Holding Corporation, and James R. Hotka. The complaint alleges that the Defendants use the promise of homeownership to lure people into toxic “rent-to-own” contracts for rundown houses, reviving predatory land contract practices that denied fair homeownership opportunities to residents of minority neighborhoods during much of the twentieth century. The lawsuit asserts claims under the federal Fair Housing, Equal Credit Opportunity, and Truth in Lending Acts, as well as state law.

The complaint alleges that the Defendants perpetrate their scheme using close to 1,000 dilapidated houses in Marion County, Indiana (which includes Indianapolis). According to the Complaint, the homes are in such poor condition that one Defendant has admitted they are not livable. The prices and interest rates charged by the Defendants are allegedly exorbitant, and their rent-to-own contracts are set up so that buyers like the four individual Plaintiffs have all the disadvantages of owning a home but none of the advantages. Buyers are responsible for all maintenance and repairs, but gain no equity unless and until the house is fully paid off. They can be evicted like renters if a single payment is late. Buyers commonly invest thousands of their own dollars and many hours of hard work to improve their houses because they believe they are owners, but the value of those improvements belongs to the Defendants. According to the Complaint, the Defendants rely on deception about the condition of the houses and the nature of the contracts to convince people to enter these transactions. The cost of the home and repairs usually becomes too much and buyers lose their homes and everything they have invested in them.

The Plaintiffs allege that the Defendants are engaged in illegal “reverse redlining” because they target this scheme at residents of minority neighborhoods. That is where the Defendants’ houses are disproportionately located, and where the Defendants’ two storefront offices are located.

Over the last decade Relman, Dane & Colfax has brought a series of reverse redlining cases involving mortgage lending and for-profit colleges.

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