Determined south Minneapolis tenants fought for repairs in their apartment building: inside a ‘rent escrow’ case

Guillermo Jimenez Morales looked up at his uneven ceiling, pointing out what he said were telltale signs — layers of spackle, the varying shades of paint — that the roof of his apartment building leaks.

“When it rains, we get pockets of water,” Jimenez Morales, 55, said before pointing at the living room floor of the south Minneapolis unit. “We put buckets here, here and here.”

He said there were also leaks in the kitchen, and in the closet, where mold had formed. The front door and windows were damaged. In the bathroom, the toilet, faucets and floor all had issues. In the winter, Jimenez Morales said he and his roommate shivered when unreliable baseboard heaters didn’t work.

Jimenez Morales said this was the state of his apartment in late 2021 — and at the time, his neighbors were having problems, too. Aside from incomplete repairs in their own units, tenants complained of poor security in the 12-unit building in Minneapolis’ Phillips neighborhood. Trespassers — including people who were apparently unhoused — would sometimes sneak in and sleep in the stairwell. They once found human feces smeared on stairwell walls.

Through the spring of 2022, city inspectors issued a series of corrective orders. At the time, representatives for the building’s owner, Lion Rock Properties, contended they responded in a timely fashion. A representative for Lion Rock Properties did not grant MinnPost’s request for an interview about the case.

In any event, the tenants felt the owners were still dragging their feet.

“All I’m saying is, the landlord needs to come and make these repairs,” Jimenez Morales said recently through an interpreter.

The tenants were so fed up that they launched a rent strike in May 2022. But the tenants were also in touch with organizers at the advocacy group Inquilinxs Unidxs por Justicia — or, in English, United Renters for Justice — who worried that not paying rent would put the tenants at risk of eviction.

“We wanted to make sure that people were safe and keep putting pressure on the landlord to fix especially the safety [issues],” said Edaín Altamirano, an organizer with the group.

So the organizers connected the tenants with legal aid groups who settled on a new, legal remedy to solve the dispute: a “rent escrow” claim.

What is rent escrow?

Filing a rent escrow claim is one legal route tenants can take to resolve disputes with their landlords over repair issues in their home.

In tenants’ rights cases involving rent escrow cases, courts can order landlords to make repairs to a unit. Until those fixes are done, either the court or a third party will collect tenants’ rent, holding it in escrow — hence the name — and releasing the money to the landlord upon completion of the work.

“It can be repairs, it can be pests, it can be privacy violations, basically anything that affects the use and enjoyment of that property,” said Mary Kaczorek, managing housing attorney with Mid-Minnesota Legal Aid.

Minnesota’s rent escrow statutes lay out a “simplified” legal procedure in which tenants can file a claim without the help of an attorney. In other, more complex types of rental property cases — such as a tenant remedies action — judges may also order tenants to pay rent into escrow until a property owner fulfills terms of a settlement.

The process has been in Minnesota law since 1989, when advocates were pushing to create a clear path for tenants to bring up concerns about living conditions and incomplete repairs with their landlords.

“There was just nothing that helped tenants that was sort of practical and doable,” said Kit Hadley, a tenants rights advocate and former commissioner of the Minnesota Housing Finance Agency from 1994 to 2002. “That’s terrible, to not be able to address issues of the poor conditions of the housing before you get evicted.”

Going back to the 1970s, advocates had hoped to pass a policy known as “repair and deduct,” which would have allowed tenants to make repairs and deduct the amount from their rent. But tenants’ rights advocates couldn’t muster the votes in the Legislature. After the idea failed again in the early 1980s, Hadley said advocates went searching for an alternative.

“What could we propose that might get enough folks that would address some of the issues raised by landlords and property owners?” Hadley recalled. “The poor condition of housing and the ineffectiveness of the remedies was just a huge issue.”

In 1989, rent escrow was the compromise they found. Instead of allowing tenants to unilaterally decide to deduct repair amounts from their rent payment, a housing court would essentially step in to mediate.

“It was considered a big step forward at the time,” Hadley said.

According to court records, tenants filed 406 rent escrow cases across Minnesota in 2022 — already exceeding the number of rent escrow cases filed in the year before the pandemic. It’s still a relatively obscure legal route; by comparison, courts handled more than 22,000 eviction cases in 2022.

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An escrow scenario driven by a tenant begins with a written letter to the landlord outlining the problems they want fixed, Kaczorek said. The landlord then has 14 days to make those fixes. If they don’t, state statute says tenants can go to court and put their rent “in escrow” with an intermediary.

In a statement, the Minnesota Multi Housing Association, which advocates for landlords in state policy matters, said the system “provides a neutral and trusted process for renters and property managers to resolve repair disputes,” the statement read.

In many cases, that 14-day period is likely enough for property owners to address the issues: “The relatively small number of annual cases,” Minnesota Multi Housing’s statement continued, “indicates that most disputes are resolved well before the court has to get involved.”

City inspectors can also trigger a rent escrow case by ordering a landlord to complete a repair by a deadline. If the landlord does not meet that deadline, tenants can also file an escrow case.

Under state law, tenants cannot be evicted for calling an inspector, demanding repairs or filing a rent escrow claim — but in her work at Mid-Minnesota Legal Aid, Kaczorek said she frequently encounters tenants are who hesitant to even call a lawyer for fear of retaliation.

“It's folks who are usually at highest risk of housing instability. People from historically marginalized communities, whether they get public benefits, maybe they have little kids, maybe it's an immigration status issue, maybe they have limited English proficiency, maybe they have a disability,” Kaczorek said. “There are so many reasons why folks are hesitant to … rock the boat with their landlord.”

The power of rent escrow, Kaczorek said, is that the court orders the landlord to take action, giving tenants a way to get accountability from their landlord.

There's also the possibility that a court can penalize the property owner for the living conditions in the unit by returning some of the escrowed rent to the tenants, or by ordering a discount on their future rent. The process for determining how much the tenants should receive through these "rent abatements" is not always straightforward.

“The analysis is ‘What is the effect on someone’s ability to use and enjoy their home?’ That means different things to different people,” Kaczorek said. “It can be pretty subjective, and that could be really frustrating, especially for people who are making decisions who may not be renters or they haven’t been renters for a long time.”

In escrow cases, both parties agree to a settlement that outlines what needs to be fixed. While the process gives landlords deadlines to meet, rent escrow cases also give landlords flexibility to make the changes the way they see fit.

“When you file those cases you get a court order saying, ‘Landlord, you have to fix this stuff and you have to fix it by this date,” Kaczorek said. “And if you don’t, then you are violating a court order.’”

What happened in the south Minneapolis tenants’ case

Jimenez Morales’ rent escrow case, which he filed in mid-August 2022, was unusual for a rent escrow case in several respects. For starters, the housing court referee agreed to consolidate his case with the other 10 tenants from his building.

The rent escrow process is designed to allow tenants to file their cases without need for legal representation, but Jimenez Morales also filed it with the help of an attorney, Julia Zwak from Mid-Minnesota Legal Aid.

The case was complex because the tenants had individual issues in their unit, but then also common issues building-wide, Zwak said. Both parties agreed to pursue formal mediation, which added another step that is not always required for rent escrow cases.

In November 2022, the tenants and their landlord reached a settlement agreement. In it, the landlord agreed to remedy “all habitability problems” the tenants had identified in their complaint by bringing in pest control, repairing the roof, addressing mold problems, replacing many of the building’s windows and making safety improvements. For six months, tenants would get a $300 discount on their rent.

The two sides also agreed to bring in an administrator as a neutral third party who would collect tenants’ rent payments and inspect repairs to ensure the landlord completed them in a “workmanlike” manner.

That term — “workmanlike” — appears in the agreement as the standard to which the court was holding the landlord. As the court wrote, “competent and skillful, but not outstanding” repairs would be sufficient to satisfy the agreement.

The term workmanlike was also central to the next fight within the case.

By mid-April 2023, the administrator was satisfied that the landlord had fulfilled the terms of the settlement, but Jimenez Morales and four other tenants disagreed. They told the court Lion Rock Properties had yet to complete a long list of repairs, including installing a key fob entry system that would keep out trespassers. They also argued the work the landlord had done to remove mold from the units — including in Jimenez Morales’ apartment — was superficial.

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The tenants’ objections triggered a brief trial. An attorney for Lion Rock Properties countered that her clients had “gone above and beyond” the requirements in the settlement agreement.

The tenants’ dissatisfaction “did not prove that the work was not completed or that the repairs are not completed in workmanlike standard,” attorney Bridget Brine argued in a May filing. “The [tenants] simply did not agree with manner or method of the repairs and the length of time that it took to complete them.”

In June, the court official deciding the case — not a judge, but a referee, Tiffany Sedillos — issued a ruling that validated several of the tenants’ objections, including their concerns that the landlord hadn’t installed a security system. Sedillos ruled some of the mold remediation was incomplete, too, though the referee stopped short of ordering Lion Rock to remove the walls and ceiling — as a mold inspector hired by the tenants had recommended.

“That's one downfall of the rent escrow statutes in general ... a tenant can't necessarily dictate the means of repair if they identify the problem and a landlord fixes it — whether it's the way the tenant would have fixed it, it's not really up to the tenant to make that call as long as the problem is resolved, at least for the time being,” said Zwak.

Sedillos also ordered the landlord to fix Jimenez Morales’ ceiling so that “repaired water damaged areas [results] in flat surfaces that are indistinguishable from the non-water damaged areas around the repairs.”

The settlement worked to the tenants’ advantage, because those previous agreements had some verbiage that the landlord agreed to. For example, in the settlement, the landlord agreed to implement the recommendation of a crime prevention specialist that the tenants called in to assess the property, Zwak said.

“In the settlement, the landlord agreed to implement the recommendation. I think that went above and beyond perhaps what the court might have awarded in a post trial order,” Zwak said. “I think the best thing about the mediation is that we could get results that I don't anticipate the court would have awarded in an order following trial.

The promise and pitfalls of the rent escrow process

Overall, the balance of the referee’s decision sided with the tenants. But to Jimenez Morales there was something hollow about the victory. The landlord completed the checklist of changes, but they didn’t always happen the way the tenants wanted.

For example, Jimenez Morales was particularly concerned that there was not enough lighting on the side of the building, which many tenants felt was a safety issue. They had asked the landlord to install lights on that side of the building to illuminate the side facing the street.

“If I was coming from work, and a robber came up to me, I wouldn’t be able to see him,” said Jimenez Morales. “And when they see no lights, they know that I won’t be able to see them.”

The landlord installed lights, but only facing the front entry of the building and the parking lot in the rear — not the side of the building the tenants were worried about, which also abuts a busy street

Jimenez Morales didn’t want the case to end. But in speaking with Zwak, he and the other tenants decided this resolution might be the best result they could obtain.

Jimenez Morales’ longtime friend and neighbor in the building, Jose Ramirez, said while both his unit and the building as a whole have improved since the start of the case, he still sees considerable issues.

“They did a lot of the repairs, like there’s more security at the door,” Ramirez said through an interpreter. “There are still a lot of changes that are needed.”

For Zwak, the unique feature of this case — with multiple tenants banded together — also created the challenge of getting tenants on the same page.

“The joint representation concept ... required consensus of our tenants to make any decisions along the path,” Zwak said. “So if we were trying to get everyone to say ‘OK, we agree that the doors are secure, or we agree that the fencing is appropriate,’ that required everyone to get on board. We can't just speak on their behalf without consulting with everyone.

“When you are working in a group I think it adds a lot of power and leverage, but there's also time involved with that too.”

Zwak emphasized that she admired the tenacity shown by Jimenez Morales and the other tenants organized by Inquilinxs Unidxs — but organizers with the group also said the renters faced an uphill climb.

“Tenants had to prove a lot,” said Altamirano. “That’s the part of the process that doesn’t help enough people. It’s like, why do I have to be almost in danger, or my family sick, or somebody tries to kill me, [for the court] to say the landlord needs to attend to this? We’d like to encourage people to go to court to talk about their truth.”

Vanessa del Campo, another organizer with Inquilixs Unidxs, said she also felt the settlement agreement didn’t necessarily change the underlying problem: that the property’s owner is not addressing repair concerns proactively.

“What we have not really seen is a solution where the landlord follows through,” del Campo said through an interpreter. “Tenants have to live in very poor conditions and wait for a solution.” (The landlord did not return MinnPost’s interview requests.)

There are reasons why landlords sometimes don’t complete repairs as quickly as tenants would hope. Kaczorek said property owners frequently bemoan supply chain issues as a reason that necessary parts don’t arrive. They also sometimes struggle to find contractors or other skilled laborers to actually carry out the fixes.

Throughout her experience with escrow cases, Kaczorek has been bothered by the way rent abatement is determined. She feels that many times the housing court will give landlords too much credit for their efforts to fix a problem — and use the landlord’s efforts to deny the tenants a discount in rent.

“We love it when landlords really hustle and try to make things right quickly for their tenants, but that's not the standard that the statute contemplates about what sort of abatement that renters should get,” Zwak said. “If a landlord doesn't provide heat for half a month, but it's because the part is missing and here's nothing they can do about it, and they've called and they've done everything they can, at the end of the day, that renter was still without heat, so they should be getting the amount of rent abatement back based exclusively on their ability to use and enjoy their home.”

Jimenez Morales and the other tenants received certain abatement amounts, although they argue it did not reflect the impact their unstable housing situation had on their lives.

Zwak said living in the units during ongoing repairs was a challenge for the tenants. Of the six total escrow cases, two households chose to move during the process.

“I think the biggest impact would have been all of the repair work being done in their units. Especially because some of it had to be redone after, it was done in a haphazard, less than perfect way. I think the legal aspects were hopefully less intrusive than the actual getting repairs done in your unit, which is intrusive for anybody, but I think in this case probably ended up being quite a bit for them to deal with,” Zwak said.

Jimenez Morales stayed. Even through the difficulties, he hasn’t contemplated moving from the unit where he’s lived for 14 years. He likes the neighborhood and his building’s proximity to transit and grocery stores on Lake Street.

He said he learned that the process takes patience and constant attention. In the end, it didn’t work out 100% the way he hoped.

“The court doesn't always give you what you deserve," said Jimenez Morales.