Owners of former Stephen Frenz properties settle with the city of Minneapolis

Tenants in 490 units in 18 apartment buildings once owned by landlord Stephen Frenz, will no longer be in limbo after the city reached a settlement with new owners.

A trial was set for this week, but called off because of the settlement, announced in a letter to tenants on Thursday.

Frenz has been banned by the city from holding rental licenses and sold them off, many on contracts for deed.

The city refused to grant rental licenses to the new owners, leading some to get other financing, while owners of 18 buildings resisted.

The new owners must find other financing than contract for deeds, which the city said would allow Frenz, and his partner Spiros Zorbalas, who has been similarly banned, to continue to have a controlling interest in the buildings.

The new owners will be issued provisional rental licenses and agree to a number of protections for tenants.

The buildings represent about a third of the portfolio of Frenz, once one of the city's biggest landlords.

The settlement must be OK'd by a City Council committee on April 23, the council, May 3, and Mayor Jacob Frey, the city told tenants.

The deal requires that 65%, or about 300 units, must be rented at affordable housing rates under a Metropolitan Council formula.

"I am really pleased with the agreement that was reached," said City Attorney Susan Segal. "It provides greater protection for the tenants than we could have otherwise achieved and provides over 300 units of affordable housing."

Scott Swanson, attorney for the entities that own the 18 buildings, said, "We hope the city approves [the settlement] and we can move foreword as partners with the city, rather than as adversaries."

One tenant Joshua Watkins, 37, who lives at 3013 S. Grand Av., said, "There is a lot in here that is a win for us tenants. … Probably the biggest win is that we can't be evicted for nonpayment of rent." City ordinance states landlords cannot collect rent unless they have a license. Since the landlord had none, Watkins said, he and some others did not pay rent despite threats of eviction in a letter from a property manager unless they paid.

In explaining the letter, Swanson said the owners believed the licenses were wrongfully denied and that "under our set of circumstances, we can collect rent despite lacking a license."

Under the settlement, no renter can be asked to move, except for legal evictions, for two years; rents must be what they were at the time of sale, subject to a 5% annual increase; the landlord must respond to heat and water leak issues within six hours and all other complaints within 24 hours; all housing code violations must be repaired by the due date set by a city inspector.

Frenz's properties have been a problem for years. Most were previously owned by Zorbalas and were frequently in poor condition. The city voted in 2012 to strip Zorbalas of his rental licenses. Frenz announced he bought the buildings but complaints continued.

The City Council voted to revoke Frenz's licenses in 2017 after learning he owned the properties with Zorbalas.

In January, Frenz was charged with perjury by the Hennepin County Attorney's Office for providing phony leases in a housing court case. Last fall, Frenz and Zorbalas agreed to pay $18.5 million to tenants in a class-action suit, brought by Faegre Baker Daniels lawyers.

Of the 60 properties controlled by Frenz and Zorbalas, most have been sold off. Frenz is threatening to evict tenants in five buildings. They say he has rejected their offer to buy them. A public event supporting the tenants will be held Saturday at 1 p.m. at S. 3122 22nd Av., sponsored by Unidxs Por Justicia (United Renters For Justice).

Randy Furst • 612-673-4224