Judge certifies class-action lawsuit against one of Minneapolis' biggest landlords

Three Apartment Shop properties in South Minneapolis.
Three Apartment Shop properties in South Minneapolis. One of the largest class-action lawsuits against a private landlord is currently underway against the owners of The Apartment Shop, which has more than a thousand apartments throughout Minneapolis.
Max Nesterak | MPR News

One of the country's largest class-action lawsuits against a private landlord is underway in Minneapolis. It could involve thousands of current and former tenants of more than 60 buildings across the city.

The plaintiffs are everyone who has rented an apartment owned by Stephen Frenz and Spiros Zorbalas in the last five years. Their claim is that Frenz and Zorbalas, who own The Apartment Shop properties, did not keep their buildings safe and in reasonable repair, as required by Minnesota state statute 504b.161. They also claim Frenz obtained his rental licenses through fraud. They're seeking all their rent money be returned.

"I've never seen anything like it," said Larry McDonough, who's not involved in the case. He's a lawyer at Dorsey Whitney and expert in landlord-tenant law. "The scheme that's alleged. The number of tenants involved. The number of units, and the time frame. If the plaintiffs are successful, we're talking millions of dollars. I've never seen that in a landlord-tenant case before."

It's not hard to find tenants who are unhappy with Frenz and The Apartment Shop. Tenants in Longfellow, Powderhorn, Uptown and Stevens Square tell stories of persistent pest infestations, broken appliances, water damage and mold.

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Angela Norris, a resident in an Apartment Shop building in Uptown, says she loves the location, but doesn't like the mice or the lack of heat in winter.

"Wintertime is always hit or miss, so I have to use the oven and space heaters just to keep warm," Norris said.

Frenz's lawyer Brad Kletscher declined to comment, but argued in court that the buildings are well maintained. He pointed to the fact that a city inspector gave Frenz's buildings the highest rank of "Tier 1."

In terms of the second major claim, about fraudulent rental licenses, you have to go back to 2011, when Minneapolis revoked three rental licenses of another major landlord: Spiros Zorbalas. The city banned him from renting apartments for five years because of persistent code violations and poorly maintained buildings.

Zorbalas appealed the decision all the way the U.S. Supreme Court, which declined to hear the case. So in 2012, he announced that Frenz was buying all of his buildings outright.

But that wasn't true.

"In 2012, Mr. Zorbalas and Mr. Frenz got together and created a number of corporations or LLC.'s that obfuscated Mr. Zorbalas's ownership in over 60 buildings and their rental licenses," said Michael Cockson, the lawyer for the plaintiffs.

The city of Minneapolis only found out about Zorbalas's continued financial stake in all these buildings last fall because Frenz told them in a sworn affidavit. After that, Minneapolis moved to revoke Frenz's licenses; that case gets a hearing next month.

This is the tenants' argument: Zorbalas wasn't supposed to have a financial interest in rental properties, ergo the rental licenses were fraudulent, ergo they should get all their rent money back.

Zorbalas and Frenz moved to dismiss the case and argued tenants' complaints are too different to be considered together. They also cited tenants who say maintenance was responsive to their complaints. Hennepin County District Judge Mary Vasaly denied all their motions.

She certified the case as class-action and asked the defense to prepare a list of everyone who's lived in their buildings in the last five years and get it to her by Friday.