By Tom Larson
A Morris landlord recently prevailed in a Minnesota Supreme Court decision that could affect how cities throughout the state can regulate rental properties.
Mike Sax, 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.
Morris City Attorney Charles Glasrud handled the case and expressed disappointment in the Supreme Court's decision.
"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 remain 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.
See more from both sides concerning the court's ruling in the Wednesday, May 28 Sun Tribune and on the paper's Web site at www.morrissuntribune.com.
Sax registered property in Morris as a residential rental property in January 2005. Later that month, city inspections of the 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, with the court finding that the State Building Code did not prohibit local regulations that are "not directly tied to building design or construction," according to court documents, even if city's regulation is addressed by the state code. The issues in the case did not involve structure, design or construction and did not involve "systems" in the property, such as electrical or plumbing. Therefore, the court found, the city's ordinance "regulates certain safety and health provisions that are part and parcel of the business of renting residential property in the City of Morris" and is a "valid exercise of the City's police powers."
Sax appealed the decision, and the court of appeals ruled that the state code "supercedes" the local ordinance in circumstances that involve construction, remodeling or other alterations and not to the use of the building as a business. The appeals court 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. And 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.
The Supreme Court found that state code adequately addressed the issues in the city's involvement with Sax Investments. "In enacting a statewide building code, the (Minnesota) legislature recognized that a single, uniform set of building standards was necessary to lower costs and make housing affordable," court documents stated.
Simply stated, 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. The city might argue that building code provisions are limited to new construction and doesn't include regulations on the use of the building, court documents stated, "But the plain text of the State Building Code refutes this interpretation."
Additionally, the State Building Code states that the post-construction use of a building is allowed without complying with current codes unless the provision is expressly applicable to existing buildings, and does not allow the use if conditions are unsafe.
Local codes also do not apply if the issues addressed are "additional and complementary" to the State Building Code.
The Supreme Court decided that the Ground Fault Interrupters, the bathroom ventilation and the egress window covers all were addressed in the State Building Code and that the city couldn't impose its own standards on the Sax property. The smoke detector issue was not clear since the court could not determine if the property was being used as a single-family home and remanded the issue to district court. Sax's attorney Rick Stermer said it's no longer an issue because Sax has since installed a smoke detector in the basement bedroom,
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."
The court also found that City of Morris arguments that the violations of its ordinance involve issues that could be dangerous to human life can't be applied. Sax's property was not cited by the city as being "dangerous to life, health, or safety," nor was the issue raised in the city's complaint or argued before the district and appeals courts.
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.