City moves to revoke landlord’s rental license

The City of Minneapolis is alerting renters in nearly 1,400 apartment units of efforts to strip a local landlord of his rental license.

More than 60 impacted apartment buildings owned by Stephen Frenz and related entities span neighborhoods including Stevens Square, Whittier, The Wedge and Lyndale. The action comes after testimony that Spiros Zorbalas, whose rental license is suspended in the city, continues to have an ownership interest in apartments publicly hailed as sold off to Frenz of Equity Residential Holdings and The Apartment Shop, according to court documents. Frenz did not immediately respond for comment.

The city is holding community meetings Nov. 16 and Nov. 28 to answer questions. Legal Aid says tenants don’t need to move out — the revocation process, which allows the landlord a chance at multiple court appeals, could take up to 18 months. A few of the buildings have already been sold. And a separate class action lawsuit is seeking appointment of a receiver to avoid shutting down the buildings.

“There’s a lot of moving pieces here, and a lot of different scenarios that could play out over the next couple of years,” said Eric Gustafson, executive director of the Corcoran Neighborhood Organization.

The Minneapolis Renters Coalition spent time door-knocking over the weekend to further explain the situation to impacted residents.

“It can be a very long and drawn out process, and unfortunately one where tenants don’t have a lot of say in it,”  said HOME Line Lead Tenant Organizer Eric Hauge.

“The best advice to a tenant, if they want to stay in an apartment, is to get as long-term a lease as possible,” said Luke Grundman, Legal Aid’s housing unit managing attorney.

Legal Aid has fielded a few calls related to repairs at the properties, including damage related to a fire in one building.

“It’s important that people continue to exercise their rights,” Grundman said. “None of these things are substitutes for tenants being their own best advocates by calling 311 and calling Legal Aid.”

Hauge said tenants should continue to pay rent. Frenz will continue as landlord, handling rents and security deposits, until a final decision or a property sale.

City officials said if they do revoke the rental license, they have broad discretion to determine a moving date.

“With respect to personal lives, we understand there may be concerns such as school year calendars and a tight rental housing market. We will try to give as much notice as possible once a vacate date has been determined for your building,” said the city in a statement.

If a building is sold, Hauge said the new owner steps into the shoes of the prior owner and must honor existing lease terms.

The Minneapolis Assessor’s Office reports that Equity Residential Holdings recently sold a 41-unit apartment building at 3725 Cedar Ave. S. for $3.4 million. The new manager at Baker Management Group said they are replacing the roof, and they’re working with a pest control company on full eradication. The manager, who declined to give his name, said they have no immediate plans to raise the market-rate rents, barring a major increase in taxes.

“We saw that was a big concern of the community,” he said. “We’re just looking to make it a good, livable place for the people who live there.”

Property records indicate another new owner has taken over 3057 14th Ave. S., the apartment building that was the initial focus of litigation. A contract for deed filed in November conveys the apartment to 3057 14th Avenue South LLC for about $1.1 million, payable over 20 years.

Bryce Ferrell said he’s managing the property on behalf of the new ownership group. He said that within three days of taking over, they installed 11 sets of new appliances, and at least nine apartments now have brand new kitchens and bathrooms.

“It was a decent priced property that needed work,” he said. “We’re trying to stay low-key. …We think it will be a good product when it’s done.”

He said tenants who remain in the building would have the option to move into newer units so the entire building is eventually remodeled. He said it’s likely that future rents would need to increase as newer furnishings are installed. They would be careful not to turn people out during the coldest stretch of winter, he said.

Hennepin County Housing Court recently appointed an administrator to ensure violations are corrected in the 14th Avenue building. In a Nov. 15 hearing on the case, the attorney for Frenz said the administrator’s power is too broad, and shouldn’t be given access to irrelevant bank records. Attorney Matthew Schaap said the case has become a “fishing expedition,” and said he received more than 1,000 discovery requests throughout the course of the trial.

Attorney Michael Cockson, who is currently litigating two cases related to Frenz, countered that the administrator needs to understand the entire picture of the property.

Separately, Cockson has filed a class action lawsuit on behalf of tenants who have lived in Equity Residential  buildings since late 2012. The suit alleges that a “sham sale” led renters to pay millions for improperly maintained housing. The complaint seeks the appointment of  a receiver to continue operating and maintaining the properties throughout litigation and any adverse action by the city. Attorneys for the defendants filed a motion to dismiss the case, saying the complaint failed to state any cause of action upon which relief can be granted.

Gustafson of the Corcoran Neighborhood Organization said he worries about the outcome for the neighborhoods. At the buildings’ relatively low rent rates, vacancy stands at about 2 percent, he said. In the tight rental market, he fears the price to buy buildings is out of reach for nonprofit housing operators. Apartments selling at high cost could either lead to inadequate investment in building improvements, or renovations that come with higher rents, he said.

“Something we don’t want is to see neighbors displaced and lose affordable housing,” he said.


Community meetings on rental license revocation process

Wednesday, Nov. 16, 6 p.m., Whittier Park Recreation Center, 425 W. 26th St.

Monday, Nov. 28, 7 p.m., Corcoran Park Recreation Center, 3334 20th Ave. S.

Renter resources

HOME Line: 728-5767

Legal Aid of Minnesota: 334-5970