Lawsuit alleges hedge fund-owned mega-landlord failed to repair and maintain rental homes that lacked heat, had backed-up sewers, doors and windows that would not close, mold, even wild animals — and when it did, violated Minnesota’s lead-paint rules

First AG lawsuit of its kind in US

February 10, 2022 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced at a press conference today [passcode: paG4$2Vj] that he has filed a lawsuit against controversial, hedge fund-owned, mega-landlord HavenBrook Homes, the landlord of more than 600 single-family residential properties throughout the greater Minneapolis–Saint Paul metro area and one of the largest landlords in Minnesota, for systematically misrepresenting its property-repair practices and keeping its properties uninhabitable for tenants, in violation of Minnesota’s consumer-protection laws and landlord-tenant law. Attorney General Ellison is also suing HavenBrook for violating Minnesota law and rules about dangerous lead-paint removal that are designed to keep children safe, and for illegally telling tenants they must leave their homes during the COVID-19 pandemic, in violation of an executive order limiting tenancy terminations during the pandemic.

The lawsuit is believed to be the first enforcement action an attorney general has filed against HavenBrook and its ownership in the United States.

“It’s almost impossible to afford your life and live with dignity, safety, and respect when your landlord puts their profits ahead of your health and safety,” Attorney General Ellison said. “I filed this lawsuit because it’s my job to protect Minnesotans from fraud and abuse, and tenants are consumers of housing who are entitled to the same protections as all consumers. HavenBrook’s strategy of extracting profit from their tenants by claiming to provide them with prompt, high-quality maintenance and repair but actually leaving them in uninhabitable homes isn’t just shameful, it’s deceptive, fraudulent, and violates Minnesota law. I’m holding them accountable for it.”

In the complaint filed in Ramsey County District Court against HavenBrook and five related companies, Attorney General Ellison alleges that in pursuit of a deliberate strategy to extract profits from the Minnesota households they rent to, HavenBrook has severely and systematically understaffed and under-resourced the upkeep of its properties. Some of the resulting uninhabitable conditions that tenants have reported to HavenBrook — often repeatedly — include no heat, backed-up sewer systems, doors and windows that do not close, mold, even live wild animals in the home, among many others.

The Attorney General’s lawsuit alleges that HavenBrook has further violated Minnesota law by misrepresenting to its current and prospective tenants that they provide “24/7” “around the clock” “same-day service” for emergency repairs when in reality, they often ignore urgent repair requests or make shoddy repair — if they respond to tenants’ requests at all.

The Attorney General’s lawsuit further alleges that when HavenBrook Homes does make repairs, it systematically fails to take mandatory lead-based paint safety precautions in violation of Minnesota law and rules that landlords must follow. This failure puts vulnerable children at risk of serious and life-long health problems.

In addition, the complaint alleges that HavenBrook violated Governor Tim Walz’s Executive Order 20-79, which set various conditions on landlords who wanted to evict tenants or end their leases during the COVID-19 peacetime emergency. The executive order had the force of law during the peacetime emergency and the Attorney General’s office is charged with enforcing it.

HavenBrook’s ownership and profit-maximization business model

Pretium Partners, LLC — a New York-based, privately-held hedge fund with $30 billion in assets — owns and controls HavenBrook through layers of shell companies. The shell companies have changed three times since 2021 (see pp. 5-7 of the complaint). Pretium boasts of owning 70,000 rental homes across the United States, including the 600 it owns in Minnesota. According to Attorney General Ellison’s complaint, “Although Pretium is not disclosed on its tenants’ leases, the company directly corresponds with Minnesota tenants regarding their tenancies.  Similarly, although Pretium is not listed as the licensee for Defendants’ rental properties, it directly communicates with Minnesota cities that issue it rental licenses” (p. 7).

A principal component of HavenBrook’s and Pretium’s business model of “innovation” and “cost control” is “internalized property management,” including “internalization of repair and maintenance.” Through these methods, “Pretium claims it has achieved profits from its single-family-rental business equal to or better than multi-family-rental businesses (which typically have much better economies of scale),” according to the complaint (p. 8).

Another component of HavenBrook’s and Pretium’s profit-maximizing business model is raising rent. Attorney General Ellison’s complaint further states that despite realizing costs savings for investors, “Defendants did not reduce rent for tenants when they realized these cost savings — in fact they continued their policy of mandating significant rent increases (including during the pandemic). Defendants disingenuously tell tenants that they have to increase rent due to their increased ‘costs to maintain homes’” (p. 8).

Impact on tenants: long delayed or ignored complaints, shoddy work, uninhabitable living conditions

Attorney General Ellison asserts in the complaint that “Defendants’ quest for profit-maximization has come at the expense of Minnesotans’ health and safety. As is reflected in the condition of their homes in Minnesota, Defendants use their innovative internal property-management systems and operating efficiencies to reduce their costs but do not direct those funds to complying with Minnesota law, which requires them to make repairs and comply with the health and safety codes that govern their aging homes” (pp. 8-9). The average HavenBrook-owned home in Minnesota is more than 80 years old.

Despite representing to tenants and prospective tenants that they provide “around the clock” “same-day service” “seven days a week,” Attorney General Ellison’s complaint alleges that HavenBrook often ignores urgent repair requests and even deletes records of them, and if they respond to tenants’ requests at all, they make shoddy repair. Pages 17-21 of the complaint detail how HavenBrook systematically misrepresents and fails to follow through on its promise.

Tenants’ desperation at their “faceless and apathetic” landlord (p. 18) comes through in these urgent repair requests:

• “The furnace again is not working properly. This has been a 2-year nightmare.” (pp. 11-12)
• “THIRD REQUEST. EMERGENCY REQUEST Our exterior front door handle has now FALLEN OFF. The internal has as well! We put in a request TWO WEEKS AGO and were not contacted by anyone. Additionally, we put in a work order for an ANIMAL in the wall weeks ago. Again, not contacted by anyone. Finally, our kitchen faucet is broken. Please send help ASAP.” (p. 12)
• “The plumbing here is terrible…I have to pour a bucket of water just to flush the toilet. I’m sick of it. I really hope u don’t send the same guy back here because he messes up other things to fix 1 thing.” (p. 15)
• “The stove is sparking and it’s very scary. This problem has been going on for too long now and when you send a maintenance guy over, he doesn’t solve the problem.” (p. 15)
• “I have had this ongoing issue for roughly two years…I empty out buckets every time someone takes a shower in the upstairs bathroom.” (p. 16)
• “I’ve filled out a 2nd request to have my water heater looked at again. I have no hot water. I sent a 1st request on Monday and noticed it’s not among my maintenance requests. Please send someone out to fix the water heater again. It has the same problem as it had when I moved in on 6.28.19.” (p. 16)
• “Bats in my house have not been able to occupy since 12/22/2019…I do not feel safe in the home! I have never seen such a blatant disregard for residents and your customers.” (p. 18)

On occasions when HavenBrook did finally respond to repair requests, often the repair was shoddy, incomplete, and did not solve the problem the tenant had complained about. Follow-up complaints were often ignored or deleted. Furthermore, the Attorney General alleges, HavenBrook failed to follow Minnesota’s Lead Poisoning Prevent Act when it did make repairs, routinely performing repairs “that disturb paint in their pre-1978 homes without taking precautions to protect their tenants” (see pp. 29-31 of the complaint). Exposure to lead, which is prevalent in older homes and in rental housing, is a major health risk and even in small amounts is especially dangerous to developing fetuses and children.

Under Minnesota law, a landlord may not waive its duty to provide a habitable home for a tenant.

HavenBrook and Pretium: no stranger to controversy

HavenBrook, Pretium, and other companies Pretium owns are no strangers to controversy and documented cases of failing to maintain tenants’ homes in habitable condition in Minnesota.

• Columbia Heights: After HavenBrook and defendants repeatedly refused to respond to repair orders from the City of Columbia Heights, the City Council — at a meeting at which no defendant showed up to explain or defend their conduct — voted to revoke HavenBrook’s 21 rental licenses in the city. Stunningly, “Defendants denied responsibility for their repeated failure to respond to the City (and failure to respond to tenants) and publicly blamed their tenants’ ‘lack of action’ as the reason why the City revoked their rental licenses.” (p. 25)
• Saint Paul: “The City of Saint Paul has revoked numerous certificates of occupancy held by Defendants and ordered tenants to vacate due to their landlord’s failure to make ordered safety repairs.” (p. 25)
• Minneapolis: Attorney General Ellison’s complaint states that in the five-year period between 2015 and 2020, the City of Minneapolis found 960 health and safety violations in homes owned by HavenBrook and its predecessors. In just the 21-month period between March 2020 and January 2022, the city found 951 health and safety violations in defendants’ homes, a 160% increase in violations per year. (p. 21)

Finally, the State’s lawsuit alleges that HavenBrook also callously and illegally told numerous tenants who were behind on their rent to move out during the COVID-19 pandemic, in violation of Governor Tim Walz’s Emergency Executive Order 20-79 that prohibited landlords from doing just that (see pp. 31-34 of the complaint). Despite the order, “Defendants told numerous tenants that their lease would not be renewed and that they had to ‘surrender the premises’ during the peacetime emergency. Even more egregiously, Defendants threatened their tenants that if they failed to move out Defendants would evict them and harm their credit rating” (p. 33).

This lawsuit has been compiled and filed by the new Special Outreach and Protection Unit in the Attorney General’s Office, which is designed to expand the Office’s consumer-outreach and -protection efforts into historically disenfranchised communities. Staff of the Unit are building on the tenant-protection work that is already underway in the Office, including the recent landmark court victory against Minneapolis landlord Steven Meldahl’s “brazen and deplorable” practices and the recent settlement with a landlord in the Willmar/Marshall area who charged tenants fees for utilities in violation of Minnesota law.

Attorney General Ellison’s press conference today is available for viewing with passcode paG4$2Vj.

Attorney General Ellison urges Minnesota consumers to report their concerns with HavenBrook Homes by submitting a complaint here or by calling the Attorney General’s Office at (651) 296-3353 (metro area), (800) 657-3787 (Greater Minnesota), or (800) 627-3529 (Minnesota Relay).

https://www.ag.state.mn.us/Office/Communications/2022/02/10_HavenBrookHomes.asp