Minneapolis landlord Stephen Frenz, who has suffered a string of legal setbacks, was dealt another blow Monday when the Minnesota Court of Appeals upheld a decision by the city of Minneapolis to strip him of some 60 rental licenses.
The city regulators revoked Frenz's licenses in 2016 after learning he failed to disclose that he and Spiros Zorbalas were operating the rental business together. Zorbalas, who had a history of neglecting his properties, had been banned for five years from holding rental licenses in Minneapolis.
Frenz appealed to the City Council, which upheld the decision. He then took his case to the state Appeals Court.
"Frenz failed to meet his burden to demonstrate error in the City Council's decision," Appeals Court Judge Tracy Smith wrote in her decision on behalf of a three-judge panel that included Kevin Ross and Randall Slieter.
Minneapolis City Attorney Susan Segal hailed the decision.
"We are quite pleased to put this chapter behind us," she said. "We have been dealing with Spiros Zorbalas-Stephen Frenz for many years. There is still work to do to make sure that tenants' interests are being protected and that the buildings are managed by responsible, properly licensed landlords."
Neither Frenz nor his attorneys, Douglass Turner and Kay Nord Hunt, returned phone calls requesting comment.
Frenz created a splash in 2013 when he announced he'd bought the buildings from Zorbalas, promising to upgrade them. But the housing violations continued and in 2016, a tenants' rights group, Inquilinxs Unidxs Por Justicia (United Renters for Justice), secured the help of pro bono attorneys at Faegre Baker Daniels, who sued Frenz over a pest infestation and lack of heat during a cold snap in one of his apartment buildings.
Frenz tried to get the suit thrown out by filing leases to show the majority of tenants did not support the suit. The tenants' attorneys discovered the leases were phony and those tenants didn't exist. They also found that Zorbalas retained a major financial interest in the buildings. The city confirmed his role and moved to revoke Frenz's licenses.
Last fall Frenz and Zorbalas agreed to pay tenants $18.5 million to settle a class-action lawsuit alleging substandard conditions. In January, Frenz was charged with perjury for submitting the fraudulent leases.
In the revocation case, the appeals court, in its 13-page decision, noted that Frenz admitted he was "not truthful" when he assured Minneapolis Assistant City Attorney Lee Wolf that Zorbalas was not involved in the properties.
Frenz argued in the appeal that Zorbalas was not the buildings' owner, but the court disagreed.
"A person of ordinary intelligence in Frenz's situation would have clearly understood that 'interest holders' under [the city ordinance] are broadly defined to include prominent indirect owners such as Zorbalas," the court said.
Frenz sold off some buildings that have since received licenses by the city. Others remain in limbo because the city will not grant licenses to the new owners who bought the properties under contracts for deed. The city argues that gives Frenz and Zorbalas ultimate control over them. A trial on that issue is scheduled next month.