Housing court weighs fate of 28 apartment buildings sold by Frenz and Zorbalas

The fate of 28 apartment buildings belonging to Stephen Frenz, the Minneapolis landlord who's been stripped of his rental licenses, was the subject of two separate court hearings on Wednesday, while more than 1,000 tenants could be affected by the decisions.

Hennepin County Housing Court Referee JaPaul Harris said he would issue a ruling soon on whether to hold the buyer of five of Frenz's properties in contempt for disobeying an earlier court order to turn over the keys and documents to an independent administrator he appointed to run the buildings.

He said he will also decide whether to stay that order at the request of landlord Rickey Misco's attorney, Oliver Edward Nelson III.

Late Wednesday afternoon Hennepin District Judge Karen Janisch rejected Misco's request to have referee Harris removed for alleged bias for failure to follow the law. Janisch wrote that state rules set the procedures for hearing a motion to remove a judge for prejudice or bias, and that the issue was not properly raised by Misco's lawyer.

Misco contends that Harris had been biased against him because he had appointed an administrator to run Misco's buildings without granting an evidentiary hearing.

Michael Cockson, an attorney representing Misco's tenants, said Wednesday in housing court that the referee's decision does not warrant removal.

"There is absolutely no indication of bias," Cockson told Harris. Misco had no rental license so he cannot collect rents, said Cockson. "If you don't have a driver's license, you shouldn't be able to drive. ... He wants a stay so he can continue to collect illegal rent."

The Minneapolis City Council revoked all of Frenz's rental housing licenses in December for continuing to secretly own properties with Spiros Zorbalas, who was banned in 2011 from owning and renting out apartments.

Anticipating the revocation, the company owned by Frenz and Zorbalas sold off many of its buildings last summer, including five to Misco, under contracts for deed.

The city's regulatory services division said that new owners would not receive licenses to rent out the properties because Frenz and Zorbalas still had a financial interest in them. Under contracts for deed, the buildings would revert to Frenz and Zorbalas if the buyers default.

Since Misco lacks a rental license, the buildings were in danger of being shut down by the city, leading to the eviction of low-income tenants in more than 50 units. Cockson sought appointment of an administrator who would get a provisional rental license to collect rents and keep the buildings operating.

At another hearing Wednesday, the Minneapolis city attorney's office sought an administrator to run 23 other apartment buildings Frenz and Zorbalas sold off on contracts for deed. The new owners were also refused licenses.

With the agreement of both sides, Housing Court Referee Mark Labine issued an order for the parties to participate in a mediation session on Jan. 12 in an attempt to resolve the issue. They will appear before Labine Jan. 17 "to review allegations" brought by the city.

It is unclear if a deal can be reached. "It's hard to say but hopefully something can be worked out," said John Mulligan, an attorney representing President Apartments LLC, one of the apartment buildings sold by Frenz and Zorbalas.

Randy Furst • 612-673-4224