Ousted Minneapolis landlord wants court referee removed from case

A former employee of disgraced landlord Stephen Frenz has accused a Hennepin County Housing Court referee of bias for issuing a court order stripping him of control of five apartment buildings he bought from his ex-boss.

The referee, JaPaul Harris, ruled last month that Rickey Misco was renting to tenants without a license from the city of Minneapolis. Misco bought the properties from Frenz on contract for deed, meaning Frenz retains the title of the property until Misco pays the full balance.

Harris ordered Misco to return three months of rent payments to more than 50 tenants and appointed an independent administrator to operate the buildings, make repairs, and collect future rents.

In a court filing, Misco, through his attorney, Oliver Nelson, has asked that Harris be disqualified from ruling on the case, and requested a stay until a Hennepin district judge could hear the matter and until all Misco's appeals have been exhausted.

A hearing is already scheduled on Wednesday morning on a motion that Misco be held in contempt of court for refusing referee Harris' order to turn over keys and documentation, including names of tenants and financial information to the administrator that Harris appointed.

The contempt motion was made by Michael Cockson, a pro bono attorney from Faegre Baker Daniels who is representing some of the tenants in the Misco buildings.

Last month, the City Council barred Frenz, one of the city's largest landlords, from renting apartments in the city for five years after the city's regulatory division discovered that Frenz and Spiros Zorbalas jointly owned the Frenz properties. This was a violation because the council in 2011 had barred Zorbalas from renting apartments in the city.

Anticipating the loss of his rental licenses, Frenz sold off his properties last summer, many through contracts for deed. But the regulatory services division concluded that Frenz and Zorbalas still had financial control of the buildings because the properties would revert to them if the buyers defaulted on payments. As a result the city has denied rental licenses to the new buyers, including Misco.

Attorney Nelson wrote in court papers that Harris denied Misco a hearing without taking sworn testimony or reviewing evidence.

Cockson said Tuesday that Misco's motion seeking a stay is "essentially asking referee Harris to allow him to illegally rent these units" while he appeals.

"Mr. Misco has never had a rental license and does not have one now because a rental license is necessary to operate rental housing," he said. "We do not think Mr. Misco has any basis for a successful appeal, much less a stay."

Misco did not make clear what kind of bias he was alleging. Cockson said Misco had presented no evidence in his court filing that Harris is biased.

Both Misco and Harris are black. Misco said in an earlier interview that he was a victim of discrimination by the city's regulatory division after he was denied a rental license.

"These claims are absurd, offensive and without merit," Noah Schuchman, the city's director of regulatory services, said at the time.

Neither Misco nor his attorney could be reached for comment.

In a separate hearing that is scheduled to be held on Wednesday afternoon, a Housing Court referee will consider a motion by the Minneapolis city attorney's office, which is seeking an administrator to operate 23 other buildings that Frenz and Zorbalas' company sold on contracts for deed.

The regulatory services division has also denied rental licenses to those landlords.

The legal turmoil occurs as the city faces a severe shortage in affordable rental housing. Many of the tenants in the apartment buildings owned by Frenz and Zorbalas live on low incomes. Under normal circumstances, buildings without proper licensing would be required by the city to shut down, leading to the eviction of thousands of tenants. With court-appointed administrators, the city would issue temporary rental licenses so the buildings could continue to operate.

The properties would revert to private ownership, once Frenz and Zorbalas sold them to entities that obtained standard mortgages from lending companies, thereby divesting Frenz and Zorbalas of control.

Randy Furst • 612-673-4224

Twitter: @randyfurst