In a victory for the city of Minneapolis, a hearing judge has ruled that the city’s regulatory division has the legal right to revoke all rental licenses held by embattled landlord Stephen Frenz.
The case centered on the fact that Frenz repeatedly failed to disclose that controversial landlord Spiros Zorbalas continued to have an ownership interest in his properties. The city revoked Zorbalas’ license in 2010.
In a ruling issued Friday, Administrative Law Judge Danielle Mercurio said city officials had demonstrated that Frenz had violated ordinances by maintaining a partnership with Zorbalas. She recommended that all of Frenz’s residential rental licenses be revoked.
The decision will be forwarded to a committee of the City Council before going to the full council for a final vote. If his licenses are revoked, Frenz will not be able to hold a rental property license for five years.
“We’re pleased, but not surprised by findings and recommendations of the hearing officer,” Minneapolis City Attorney Susan Segal said Saturday. “This allows us to proceed to the next step in the process.”
Frenz is one of the city’s largest landlords, owning about 60 apartment buildings in south Minneapolis, including in the neighborhoods of Stevens Square, Whittier, the Wedge and Lyndale.
Attorney Michael Cockson, who led the tenants’ lawsuit, said many residents are confused about who owns the buildings and who is collecting rent. He applauded the ruling, saying that through the years, Frenz’s properties have had “hundreds, if not thousands, of housing code violations and tenants living in substandard conditions.”
Reached Saturday afternoon, Frenz said none of the 1,000 tenants will be disrupted if he loses his licenses.
“We’ve sold or are in the process of selling all of the properties,” Frenz said. “We decided to exit the city of Minneapolis and have taken steps to ensure that no one’s housing will be affected by this.”
Frenz also said he plans to appeal if the city pulls his licenses. “You build a $150 million business over 25 years and spend your life trying to change neighborhoods in a highly cooperative relationship with the city, the police department and neighborhoods,” he said. “We were very forthright. Rather than engage, they decide they’re going to throw you out.”
Frenz purportedly bought the properties from Zorbalas in 2012. The documents show that Zorbalas maintained tight control of the properties, even after the alleged sale.
Frenz and Zorbalas maintained that Frenz had full control of the apartment buildings through the Apartment Shop, a business that Frenz owned. But documents suggest that Frenz reported to Zorbalas, who appears to have exerted ultimate authority. Frenz originally refused to disclose the operating agreement at the administrative hearing, but eventually he turned it over.
The city first learned that Zorbalas had retained an ownership interest in the properties in 2016, after a tenant lawsuit uncovered fraudulent business practices. In her ruling, Mercurio detailed “ongoing omissions and representations” dating back to 2013 in which Frenz failed to disclose Zorbalas’ ownership interest.
She didn’t mince words, writing: “The Court finds that the testimony of Stephen Frenz lacks credibility.”