A Hennepin County judge has appointed an administrator to oversee 17 apartment complexes owned by a Minneapolis landlord under fire by tenants and city regulatory authorities.
The receivership covers more than a quarter of Stephen Frenz’s properties in Minneapolis and includes 436 apartment units. Frenz’s attorney, Malcolm Terry, filed a motion last Friday asking for a stay of the order pending an appeal, but there is evidence the receiver has already notified tenants it is now collecting rents. Terry did not return messages for comment.
The order was issued by Hennepin County District Judge Mel Dickstein, after a mortgage lender initiated a rare foreclosure action, largely over allegations that Frenz failed to disclose that Spiros Zorbalas, who was banned by the city from owning apartment properties in Minneapolis, had a financial interest in Frenz’s buildings.
A foreclosure over misrepresentation of ownership “is very unusual,” said Larry McDonough a Dorsey & Whitney attorney who wrote the law creating housing courts in Hennepin and Ramsey counties. “Foreclosures are almost always about nonpayments.”
Frenz’s company, National Housing Fund, took out a $26.5 million loan on the properties in 2014 and did not make a March payment, putting him in default, but the lenders focused on the allegation that Frenz reneged on a pledge to not make Zorbalas an owner.
After a history of housing violations and three license revocations, Zorbalas was banned by the City Council from renting apartments in the city. The ban was upheld by the Minnesota Court of Appeals. In 2012 Frenz announced he was buying Zorbalas’ properties and was hailed as a savior by city officials. Since then, he’s been the target of legal actions and by a tenants activist group, Inquilinxs Unidxs por Justicia (Renters United for Justice), for unjust evictions, sordid conditions and failure to make necessary repairs.
During a January 2016 housing court case over heating problems and pest infestation in a south Minneapolis apartment building, pro bono lawyers from Faegre Baker Daniels, discovered that Zorbalas still had a financial interest in Frenz’s properties.
City housing regulators took notice, and moved to revoke Frenz’s licenses in all 62 of his rental properties in Minneapolis. A hearing on the matter has been postponed twice. Meanwhile, lenders for 17 of the buildings launched their own inquiry last fall, satisfied themselves that he violated ownership requirements that Zorbalas not be involved, and filed for foreclosure in May.
Nathan Mordal, 32, who rents a studio apartment from Frenz in a building facing foreclosure, said he was optimistic that a new receiver could lead to repairs. He said his apartment has mice and insect infestations, mold and plumbing problems and is not warm enough in the wintertime.
“These buildings need a thorough upgrade,” he said.
Molly Hasbrook, 33, who has a studio apartment on the 1700 block of 2nd Av. S., said she was grateful a receiver was appointed. “I think Steve Frenz has been completely negligent about caring for the building,” she said.