The Minnesota Attorney General's Office has settled a lawsuit with companies it accused of "severely undermaintaining” properties on Minneapolis' North Side. Pictured here is a property purchased by one of the companies involved in the case. (Leila Navidi)

The Minnesota Attorney General’s Office has settled a consumer protection lawsuit it launched two years ago against a “hedge fund-owned mega landlord” that rents and manages more than 600 rental properties in the state.

State officials had accused HavenBrook Homes, its parent company Progress Residential and the “syndicate of corporations” behind them of extracting profits from low-income tenants by “severely under-maintaining” the homes. The state Supreme Court had denied the companies’ appeal.

“No Minnesotan should have to live in a home that loses heat, lacks hot water, and is infested with pests and mold due to a landlord’s negligence,” said Attorney General Keith Ellison. “Landlords cannot use their legal and economic power over renters to take advantage of them.”

Under the settlement agreement, HavenBrook Homes will have to put $2.2 million into a restitution fund for current and former tenants who experienced repairs, had a member of their household diagnosed with elevated blood lead levels or been illegally forced to leave a HavenBrook home during the state’s COVID-19 eviction moratorium.

The companies also agreed to forgive rental debt owed by all former tenants of their Minnesota properties up to $1.9 million.

“Enhancing the leasing and resident living experience and making a positive difference for our residents has been our top priority since taking over property management for HavenBrook in mid-2022,” said Progress Residential general counsel Ama Romaine.

“We are pleased to have resolved this matter in a manner that is consistent with our commitment to making a positive impact on the communities we serve.”

Much of the legal wrangling in the case revolved around the state’s efforts to establish the relationship between HavenBrook Homes’ holding companies.

In early 2021, the New York investment firm Pretium Partners acquired the once publicly-traded, single-family rental company Front Yard Residential, whose property management affiliate was HavenBrook Homes. Around the same time, Minnesota tenants of HavenBrook Homes began to protest myriad problems that they said made their homes uninhabitable.

Minneapolis repeatedly sued HavenBrook Homes for repairs and launched a special inspection project for its properties within the city. Columbia Heights revoked HavenBrook Homes’ rental licenses in 2022.

The companies’ lawyers claimed the state could not prove that they owned HavenBrook Homes — as opposed to merely investing in it through another corporate affiliate — and were therefore not responsible for its housing violations.

“What they’re trying to do is clump them all together and kind of create a bunch of dust, if you will, and say, look, there’s all this stuff going on, they’re in the single-family home rental industry,” said the companies’ lawyer, Joseph Windler. “The bad acts are alleged way over here, and then they did this stuff over here ... that might be related, so, therefore, all of them are connected.”

The courts declined to dismiss Pretium Partners from the lawsuit. They found that the firm had repeatedly held itself out as the owner of the Minnesota homes through communications with tenants and housing advocates.

Pretium employees had also facilitated third-party inspections of HavenBrook Homes and contacted Columbia Heights in an effort to have HavenBrook Homes’ licenses reinstated.

Tenant Arianna Anderson, who lives in a Progress Residential property in Crystal, said Friday that she was still trying to understand the settlement but hoped it would provide an avenue for tenants to buy their homes.

“If we can get those 600 people that were affected by the malpractices of HavenBrook, Progress and whoever they are now, if we can get them into safe, dignified and affordable housing, that’s the real win,” Anderson said.

Progress Residential and Pretium Partners have announced plans to transfer their properties to affordable housing entities this spring.

The companies are not required to follow through, but the settlement ensures tenants can’t be displaced in the process. It also requires any homes that are sold to comply with lead-paint hazard laws and city-ordered repairs.

For any property that isn’t sold, existing tenants who owe at least two months’ rent will be able to end their lease early and get rent forgiveness, as well as $1,000 in relocation assistance.

Progress Residential is expected to make those offers to tenants directly, according to the Attorney General’s Office, while the state will reach out to tenants in the next few months to participate in the restitution plan.