The Minneapolis City Council is poised to reject six rental applications Friday for properties associated with embattled landlord Stephen Frenz as city officials move toward a more definitive action: asking a judge to place 18 of Frenz's apartment buildings under a temporary independent administrator.
The 18 buildings contain about 500 rental units and an estimated 1,000 tenants, according to tenant organizers Inquilinxs Unidxs por Justicia (United Renters for Justice). Many of the apartments are rented by low-income tenants struggling to find affordable housing, and some remain in substandard condition.
"The goal is to protect the tenants until there are owners of these buildings who qualify under the city requirement to obtain rental licenses," Minneapolis City Attorney Susan Segal said Thursday.
A trial seeking to put all 18 buildings under an administrator is scheduled April 10 and 11 before Hennepin County District Judge Ronald Abrams. The administrator would collect rents and make repairs until the city deems a new owner qualified to hold a rental license.
Frenz, one of the city's biggest landlords, lost rental licenses on more than 60 buildings in December 2017 after the Minneapolis City Council learned that he secretly owned the properties with Spiros Zorbalas, whom the council had banned from owning rental property.
Frenz and Zorbalas agreed to pay $18.5 million to settle a class-action tenants' lawsuit last October. In January, Frenz was indicted on a charge of perjury in a separate tenants action.
Frenz has sold many of his properties on contracts for deed, but the city's regulatory services division has refused to grant rental licenses to the new owners because it says Frenz and Zorbalas have maintained a financial interest.
An administrative officer, Fabian Hoffner, held hearings and sided with the city. In a memo about the first six properties, Hoffner wrote that the buyers entered into agreements with Frenz "in return for a disproportionately small down payment and a very large balloon payment due in five years." He wrote, "The terms of the sale are suspect" and the deal "greatly increases the likelihood that the property would return" to Frenz.
"The arrangement does not appear to be at arm's length, but instead manipulated in an attempt to circumvent the original sanction," he wrote.
Frenz did not return a phone call Thursday. Scott Swanson, an attorney representing would-be landlords Jennifer Strand, Kevin McMullen and George Francois disputed the city's findings.
"We think we'll be vindicated by the Court of Appeals on that," Swanson said. "We disagree with the city's analysis for their denial."
Swanson acknowledged his clients pay Frenz, but said Frenz is otherwise not involved with the companies that now own the properties.
The council is to vote Friday to affirm denial of six rental licenses. The other 12 are still making their way through the administrative process, said Erik Nilsson, deputy city attorney.
"For too long, unscrupulous landlords have been accessing loopholes at the expense of people's health and safety," Mayor Jacob Frey said in an interview Thursday. "If we approve a contract for deed as a legitimate mechanism to get around rental revocation, then we're allowing for a continued mistreatment of tenants with no real consequences for the unscrupulous landlord."
With their landlords in limbo, tenants in some properties say the conditions are as bad as they were under Frenz.
On a recent subzero afternoon, the radiators in Thor Nystrom's one-bedroom apartment at 905 Franklin Av. W. were lukewarm, and a space heater barely kept the temperature above 50 degrees. "This is good," said Nystrom, at least better than a week earlier, when his apartment didn't get above the low 40s.
In the unit above him, Douglas Farmer said it's a little better, if only because heat rises. Both Nystrom and Farmer have stopped paying rent after being advised that the property's new owner, McMullen, doesn't have a license so cannot legally collect rent or evict them.
Swanson said his clients are doing their best to address violations. "My clients are endeavoring to work with the city versus against it," he said. "I think they're doing a very good job trying to maintain their properties."
In a letter to tenants, Strand accused United Renters of trespassing on the properties and warned that failure to pay rent may lead to eviction.
Luke Grundman, managing attorney for the housing division at Mid-Minnesota Legal Aid, said while he didn't know the status of licenses for each Frenz property, "The ordinance is very clear. If you don't have a rental license you cannot demand, charge or collect rent."
Juna Lopez, 56, lives in an apartment with her daughter at 3215 21st Av., a building targeted for the tenant remedies action. She said the apartment is filled with cockroaches, and two burners on the stove lack knobs. "I'm holding out hope the city will do the right thing and put in an administrator and do the repairs we need," she said.
Guillermo Jimenez Morales, 51, lives with a roommate at 3100 Bloomington Av., a building also slated for a tenants remedies action. He said that besides cockroaches, bedbugs and mice, there are leaks from the ceiling. He's had to put out as many as 10 pails to catch the water.
He said he'd be happy to have an administrator take over the building but worries what will happen next. "I don't know if we would be able to stay or if the new owner would make us leave," he said.
