I have written several times about Minneapolis Rental Licensing challenges:

• Minneapolis Rental Licensing Searching for Unlicensed Rentals
• New Minneapolis Rental Conversion Fee

  

I do understand the need for some regulation, even if I don’t agree with the above items. The newest tale in the Minneapolis Licensing saga came up at the end of last week. Our rehab contractor was at the City of Minneapolis checking on which customers would be required to pay the Rental Conversion Fee on the North Minneapolis houses that they just purchased.

When the city person checked the computer for a very nice 3 bedroom, 1.5 story house at 34xx Russell Ave N that a customer had recently purchased, she told our contractor that this property had lost its rental license. At first, this made no sense as I always understood that the property held the license, but just the owner/manager could lose the license on a house. I assumed (I guess now incorrectly), that if the house was sold, the new owner could apply and receive a Minneapolis rental license.

I was wrong. This house had its license stripped and even going through foreclosure, having a new owner, and paying the rental conversion fee, would not allow this property to be a rental. I have come to understand that the status of a rental license is like the “grandfather” status that we refer to in regards to code compliance. Definition of grandfather status: As building codes have changed over the years, houses previously built to the then current codes are said to be grandfather’ed in and they are not required to be updated to the current code standards. This is why you still see knob and tube wiring in houses built 100 years ago, even though that code changed 50 years ago.

Luckily this buyer was still in their inspection period and we quickly cancelled the contract. If we had not found this issue, this investor could have been left with a house thats only use was for an owner occupant. The only option would have been to flip the property, which could have been a difficult situation to resell even a rehab property in North Minneapolis.

The city said that restoring the license is very similar to obtaining a variance on any other city regulation. There is a large packet of information you need to complete. Then you will need to speak in front of the licensing board. I have been told that in these situations, you are almost always fighting an uphill battle as it is much easier for them to deny your request.

Despite buying and rehabbing almost 100 houses in Minneapolis, this is the first time that anyone in our group had seen this issue. I recommend that you confirm license availability prior to closing on your next Minneapolis Investment Property.