Minneapolis landlords Stephen Frenz and Spiros Zorbalas, who have been under fire for their illegal operation of a swath of apartment buildings in Minneapolis, lost another round on Tuesday when a housing court referee ordered five of their recently sold buildings to be placed under an independent administrator.
Hennepin District Court referee JaPaul Harris ruled that Misco Holdings, which purchased five south Minneapolis buildings from Frenz and Zorbalas, had no rental licenses and was illegally collecting rents. He ordered rents returned to tenants for September, October and November.
Pro bono attorney Michael Cockson of Faegre Baker Daniels, who is representing the tenants, said Harris' decision could put other landlords who are illegally collecting rents on notice that they may be challenged as well.
"A large number of the purchasers of Frenz and Zorbalas properties have been unlicensed for months," Cockson said. "We are exploring all options, representing additional tenants at these buildings to make substantially the same case."
The City Council stripped Frenz of 60 apartment building rental licenses in November for failing to disclose he owned the buildings with Zorbalas. Zorbalas, who had a history of running substandard properties, was banned in 2011 from renting apartments in Minneapolis for five years.
After learning of the Zorbalas-Frenz partnership, the city regulatory services division began the process in 2016 to revoke Frenz's rental licenses. Last summer, Frenz revealed he sold the buildings under the name of Equity Residential Properties, an entity controlled by Zorbalas and Frenz.
Equity Residential sold the buildings under contracts for deed, meaning that if the buyers should fail to make payments, the properties revert to Equity Residential. They sold five of them to Rickey Misco, owner of Misco Holdings. In November, the city's regulatory services division informed eight buyers of 15 properties, including Misco, that because Zorbalas and Frenz still had a stake in the buildings through contracts for deeds, it would not grant them rental licenses.
An attorney for Misco did not return a phone call.
On Monday, in a separate case, Hennepin County housing court referee Mark Labine announced the appointment of an administrator to oversee 43 rental properties owned by Mahmood Khan, a north Minneapolis landlord who also was stripped of his licenses.
Lighthouse Management Group was appointed to oversee the Misco properties as well as Khan's buildings.
"We are very pleased that the administrator was appointed in both cases," City Attorney Susan Segal said Tuesday. "This will help protect the tenants whose well-being is our prime concern."
Randy Furst • 612-673-4224 Twitter: @randyfurst
