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Morris City Attorney will lobby lawmakers in light of Supreme Court's decision

By Tom Larson

Sun Tribune

A Minnesota Supreme Court decision favoring a Morris rental property owner will prompt Morris' city attorney to ask the Legislature for law changes to bolster the State Building Code regarding older structures.

"People have been killed in substandard rental housing in Minnesota," said Morris City Attorney Charles Glasrud, "and we cannot allow this decision to deter us from addressing the danger."

But the attorney for rental property owner Mike Sax said state law already gives cities adequate power to enforce rental regulations to ensure safe and affordable housing, and that the Supreme Court's ruling will benefit cities by making it easier to monitor rental property.

"They'll be working under a uniform state code," said attorney Rick Stermer. "That's going to make it much less complicated for owners and rental inspectors. It's a good thing for affordable, safe housing.

The Supreme Court decision could affect how cities throughout the state can regulate rental properties.

Sax, owner of Sax Investments, Inc., won his appeal in a case against the City of Morris. After having his arguments rejected in district court and the state court of appeals, the Supreme Court ruled in his favor in a decision filed May 15.

At issue was the city's enforcement of its Rental Licensing Ordinance. Sax contended that his property was bound only by the State Building Code and that city inspections that found his property in violation of the city's ordinance were not legal.

"I was complying with the (State) Building Code and this ruling says that I don't have to do anything more than what the building code requires," Sax said.

In January 2005, city inspections of Sax's property found eight violations of the city's rental ordinance. A re-inspection two months later determined that four violations had not been corrected: Ground fault interrupter receptacles were not installed on outlets within six feet of water sources; the bathroom did not have a window or a vent fan; basement egress windows did not have covers; and the basement bedroom did not have a smoke detector.

The city assessed Sax a fee for the failed re-inspection, which court documents indicate he did not pay, and he did not make the corrections the city demanded. The city sought injunctions to keep Sax from renting the property until he abided by the ordinance and paid the fee.

Sax again refused, contending that the property complied with the State Building Code, and he also filed a counterclaim for an order that would force the city to issue a rental license and an injunction for the enforcement of the ordinance.

The city prevailed in Stevens County District Court and Sax appealed the decision, and the court of appeals concluded that the city could regulate rental housing "by enacting standards of habitability."

The Supreme Court stated that the State Building Code, established in 1972, provides uniform standards and reasonable health, safety, comfort and security safeguards. In a 1975 case involving Minnetonka and a property owner, the court found that city ordinances were preempted by the state code if the code dealt with the issue at hand, and that structures built before 1972 could continue to be used without complying with State Building Code regulations.

The Supreme Court found that state code adequately addressed the issues in the city's involvement with Sax Investments, stating that if the issue being regulated is included in the State Building Code, it is a "building code" regulation and a municipality can't enforce standards that are different from the building code.

Court documents stated that cities are likely to be concerned about the Supreme Court's ruling because rental property owners do not have incentives to maintain rentals as they do their own homes and that tenants have little recourse to force owners to take care of "habitability problems."

"We recognize," the court stated, "that substandard housing raises health and safety issues for municipalities, and that disposition of this case raises considerations about the ability of municipalities to address these issues. But regardless of our views on the merits of these policy arguments, we are bound to apply the policy decisions adopted by the legislature and embodied in the State Building Code."

Glasrud's contention is that grandfathering in certain uses can lead to a dangerous situation.

"The Supreme Court took a very strict interpretation of state law which left little room for effective regulation of residential rental housing in Minnesota," Glasrud said. "Although there remains some respects in which rental regulation can still be accomplished on the local level, this ruling has gutted cities' ability to enforce many important safety standards, particularly in older buildings."

Glasrud noted that the cities of Rochester and St. Paul joined in the appeal because aging rental properties in those cities represents hazards that ordinances like Morris' could address.

Rental property in Morris is generally in good shape, Glasrud said, with almost all meeting the city's ordinance. But unless state laws can be changed, the market will have to decide which rental owners are meeting standards "because it will be difficult for the City to require repairs," he said.

Sax said Monday that he's in the process of getting out of the rental business, although the Supreme Court's decision might prompt him to reevaluate.

"Given the outcome in this case and how the opinion was written, (owning rental property) could be less of a hassle," he said.

Stermer said that while cities might "spin" the decision in other ways, he's convinced it will help cities to have a uniform standard to regulate rental property, and that it won't promote substandard housing by "slumlords"; cities still have plenty of power to ensure that properties are maintained to meet safety and health standards.

"If you read the (Supreme Court's) decision, it leaves a lot of room for cities to come up with rules and regulations for rental property," Stermer said. "Enforcing the State Building Code gives them more than adequate power to keep rental properties up to standards and safe."