Detroit Nuisance Lawsuit Exposes Tokenized Housing Risks

In July 2025 the City of Detroit filed what it described as the largest nuisance abatement lawsuit in its history against RealT, also known as RealToken, and 165 related corporate entities. The complaint targets 408 rental properties across the city, alleging chronic code violations and unsafe living conditions that city officials say endanger tenants and neighbors.

RealT is a blockchain based real estate platform that sells fractional interests in rental homes through digital tokens. Investigative reporting by Outlier Media found that the company has raised roughly $94 million from investors for about 700 Detroit properties, positioning itself as a large scale experiment in tokenized real estate.

By January 2026, after months of court orders and limited repairs, Detroit asked a judge to appoint a receiver to take control of RealT’s Detroit portfolio. The request followed reports of tenants still living without heat or water, buildings vacated for safety reasons and allegations that rent payments had been routed away from a court ordered escrow account.

Key Developments in Detroit’s RealT Dispute

Detroit filed a nuisance abatement lawsuit in July 2025 against RealT, its co-founders and 165 related entities over conditions at 408 rental properties.
RealT’s model uses ERC-20 tokens and a Delaware series LLC structure to sell fractional interests in hundreds of Detroit homes to mostly overseas investors.
Outlier Media reporting documented undisclosed mortgages, unclear deeds for about 100 properties, more than $3.6 million in tax debt and extensive blight violations.
Judge Annette Berry issued a temporary restraining order blocking RealT from collecting rent or evicting tenants at the sued properties and requiring rent be paid into escrow.
In January 2026 Detroit asked the court to appoint a receiver, citing ongoing health and safety violations, slow repairs, unlicensed contractors and alleged diversion of escrow funds.
The RealT case highlights how tokenizing distressed housing can separate global investors from on the ground obligations, complicating enforcement and tenant protection.

How RealT’s Tokenization Model Works in Detroit

RealT describes its structure in a white paper as a Delaware series limited liability company in which each series holds a single property and issues ERC-20 tokens that represent membership interests in that series. According to the document, each token is a digital LLC interest that corresponds to an ownership share in the underlying real estate, with tokens recorded on the Ethereum blockchain and governed by smart contracts published by RealT.

The company markets these tokens primarily to non U.S. investors, who can buy small stakes in individual Detroit homes and apartment buildings. As reported by Outlier Media, RealT says U.S. residents are restricted under securities rules, while foreign buyers can participate through cryptocurrency payments and receive pro rata distributions of rental income.

In practice, this has created a large pool of global token holders with economic rights to Detroit rental properties, while day to day control remains with RealT affiliated managers and local property management firms. Outlier’s review of Detroit records found that RealT has tokenized or marketed more than 600 properties in the city, many in lower cost neighborhoods with aging housing stock.

The real estate itself, however, still sits inside conventional legal entities and on county deed records. Tokenization changes how investors buy into the capital stack and how ownership interests can be traded, but it does not remove landlord obligations under housing codes or nuisance law.

More broadly, research on asset tokenization by the Bank for International Settlements notes that turning real world assets into programmable tokens can improve settlement and transparency only when legal, technical and governance layers are aligned. The Detroit case illustrates what can happen when the legal and operational layers around tokenized housing fall out of sync.

Inside Detroit’s Nuisance Abatement Lawsuit

Detroit’s lawsuit, filed in Michigan’s 3rd Circuit Court, alleges that RealT’s network of entities allowed hundreds of homes to fall into severe disrepair. According to city statements and coverage by Outlier Media, none of the 408 sued properties had certificates of compliance when the case was filed, and 53 were classified as posing immediate risks to health and safety.

City officials and court filings describe repeated problems such as sewage backing up into basements, lack of heat and running water during winter months, structural hazards, roof failures and unsecured vacant buildings. The complaint frames these conditions as a public nuisance that affects entire neighborhoods, not just individual landlord tenant disputes.

Nuisance abatement actions in Michigan allow cities to ask courts for broad remedies when properties threaten public health or safety. In this case Detroit seeks to force repairs, bring all 408 properties into code compliance, recover outstanding blight fines and tax debts, and hold RealT’s co founders personally responsible for the costs associated with remediation.

On July 23 2025, Judge Annette Berry granted Detroit’s request for a temporary restraining order. As reported by Outlier Media, the order bars RealT from collecting rent or evicting tenants at the 408 properties until they meet code requirements, directs tenants to pay rent into escrow accounts and requires RealT to secure and clean out the 53 most dangerous properties within 30 days and repair them within 90 days.

In public comments quoted by Michigan Public, RealT has argued that previous third party property managers are responsible for many of the maintenance failures. A company spokesperson said those firms were paid to oversee repairs and tenant complaints but allegedly failed to do so, while city officials maintain that RealT and its affiliates remain the legal owners and landlords.

Mortgages, Missing Deeds and Tax Debt

Alongside the nuisance allegations, Outlier Media’s investigation uncovered significant gaps between what RealT sold to investors and what it appears to own in Detroit’s property records. A September 2025 story by Outlier Media reported that RealT marketed tokens tied to nearly 100 Detroit properties where the company had not established clear ownership in Wayne County deed records.

One cluster that drew particular scrutiny consists of 39 single family homes on Lillibridge and Fairview streets on Detroit’s east side. According to a joint Outlier and Michigan Public report, RealT began selling tokens for these homes in July 2023 and raised more than $2.72 million from investors. Yet as of July 2025 the deeds remained with Brewer Park Homes LDHA LP, whose owner said the purchase agreement had been pending for more than a year without closing.

RealT has cited unresolved documentation issues on the seller’s side as the reason the transaction has not closed and has said it retains an option to complete the purchase by 2026. Brewer Park’s owner has publicly disputed those explanations, and the properties’ taxes and blight tickets continue to accrue under Brewer Park’s name, even as tenants report interactions with RealT affiliated managers.

Outlier’s mortgage reporting also identified nearly $4.8 million in loans taken out on 33 Detroit properties that had already been fully funded by token sales. In an earlier call with investors, RealT co founder Jean Marc Jacobson had said there were no mortgages on RealT properties, but county records showed multiple mortgages recorded in 2021 and 2023, including two large loans on apartment buildings that Detroit later designated as top priority hazards.

The same investigation found that RealT was delinquent on taxes for 30 of the mortgaged properties, which had collectively accumulated 571 blight tickets. As of late summer 2025 RealT’s Detroit tax debt exceeded $3.6 million, and U.S. Postal Service data suggested roughly 140 of its properties were vacant. Despite these off chain liabilities, RealT continued to market regular dividend payments to token holders drawn from rental income.

For investors, these findings raise basic questions about what RealT tokens actually represent. In many cases they appear to convey an interest in LLC entities that may not hold clear title to the underlying homes or that sit beneath undisclosed mortgages and tax liens, exposing token holders to risks that are difficult to assess from standard platform disclosures.

Escrow Orders, Repairs and Detroit’s Receiver Request

Judge Berry’s temporary restraining order was meant to shift leverage toward tenants and the city by freezing rent flows until RealT addressed the most dangerous conditions. Subsequent court filings, however, indicate that progress has been uneven. In a January 2026 story, Outlier Media reported that many tenants were still living with no heat, water or safe structures months after the initial deadlines.

According to the city’s motion seeking a receiver, RealT had requested escrow funds to rehabilitate just 14 properties, only three of which were known to be occupied, while more than a dozen other buildings still had outstanding health and safety violations. Court filings describe cases where roofs leaked to the point of ceiling collapse and where buildings were vacated entirely because heat could not be restored.

Detroit also alleges that RealT used unlicensed contractors on some jobs and failed to follow the scope of work contemplated by the court. The motion says the company funneled around $125,000 in rent payments into an account outside the city controlled escrow structure, in violation of Judge Berry’s order that rent be held for code related repairs.

In a statement quoted by Outlier, Detroit Corporation Counsel Conrad Mallett said, "We are asking the court to appoint a receiver because the level of home improvement provided by RealToken has been slow, incomplete and not according to the judge’s order. The tenants deserve better living conditions, including basics like heat and water."

Lead city attorney Tamara York Cook wrote in a December 2025 email to RealT’s property managers that the ongoing conditions were "completely unacceptable" and warned that the matter would be escalated absent meaningful progress.

The receiver motion asks the court to grant an independent manager authority to collect rent, carry out repairs, rehabilitate properties or, where necessary, order demolitions at RealT’s expense, as permitted under Michigan receivership law.

If granted, such an order would effectively sideline RealT’s control over its Detroit portfolio while leaving underlying ownership interests in place. Judge Berry scheduled a hearing on the receiver request for mid January 2026 and set a trial date of January 27, 2026, leaving the ultimate structure of any remedy still to be decided.

When Tokenized Ownership Meets Distressed Housing

RealT’s Detroit troubles highlight a central tension in tokenized real estate, particularly when the assets are older, low margin rentals. The platform connects hundreds of global investors to individual homes through programmable ERC-20 tokens, but maintenance decisions, code compliance and tenant relations remain concentrated in local LLCs and management companies that may change over time.

Detroit’s nuisance complaint and a July 2025 press release from the city describe a web of roughly 165 corporate entities associated with RealT that own or manage properties across the city. For inspectors and neighbors, the legal owner of record may be a shell LLC with a different name from the token brand, complicating attempts to assign responsibility when a specific building lacks heat or accumulates blight.

At the same time, the token structure can give distant investors a sense of direct property ownership that does not match the realities of local enforcement. Outlier’s reporting notes that RealT continued to pay dividends on some buildings that were vacant or not collecting rent, while investors may have had limited visibility into pending code cases, unpaid taxes or undisclosed mortgages listed against the real estate.

Academic and policy work on real world asset tokenization consistently stresses that tokens sit on top of existing legal frameworks rather than replace them. The BIS, for example, has written that tokenization embeds asset information and transfer rules in code but still depends on clear legal rights, reliable data and enforceable governance structures.

Detroit’s lawsuit is an attempt to apply traditional housing and nuisance rules to a novel ownership stack that spans on chain and off chain layers.

In that sense, the RealT case is not a referendum on tokenization in the abstract. It is a test of whether a tokenized landlord that aggregates hundreds of distressed properties through series LLCs and digital membership interests can meet the same basic obligations around heat, water, structural safety and taxes that apply to conventional landlords active in the same neighborhoods.

Implications for Real World Asset Platforms

The Detroit action arrives at a moment when financial firms and technology companies are promoting tokenized "real world assets" as a growth area in digital finance. Reports cited by industry outlets project significant expansion in tokenized markets over the coming decade, but much of that discussion focuses on securities and money market instruments rather than occupied housing.

RealT chose to apply tokenization to some of the most fragile segments of Detroit’s housing stock, including subsidized developments and older single family rentals. As Outlier’s series documents, those properties came with preexisting challenges such as capped rents, aging infrastructure and historic underinvestment, which leave little room for error when taxes rise or repairs are deferred.

For platforms that follow a similar model, the RealT case underscores the importance of rigorous disclosure about off chain obligations. Investors evaluating tokenized rental products may need clear, regularly updated information on deeds, mortgages, tax status, code violations and vacancy rates, not just target yields and token pricing. In Detroit, many of the most serious issues only became widely visible after sustained public records work by local reporters.

The case also raises design questions for token governance. RealT’s white paper emphasizes that property management decisions sit with a managing member and professional managers, with token holders playing a limited role. That structure may simplify operations, but it leaves investors dependent on the platform to surface problems and respond to enforcement.

Tenants and cities, meanwhile, must pursue remedies through courts rather than through any on chain governance processes.

Detroit’s approach – treating tokenized landlords as conventional owners and prioritizing physical conditions over ownership structure – sets a potential precedent. The outcome of the receiver motion and any subsequent appeals will likely shape how other cities weigh enforcement against the complexities of fractional, distributed ownership models.

As of mid January 2026, the outcome of Detroit’s receiver request and the broader RealT lawsuit remains uncertain. Whatever the court decides, the case has already clarified that putting rental homes on a blockchain does not exempt a landlord from local housing law, and that token holders’ interests ultimately depend on how well those off chain obligations are met in the neighborhoods where the properties stand.