The neighborhood lawyer
by Dan Heilman
Gary Hansen is charged with limiting the collateral damage to North Minneapolis from Waconia properties.
Minneapolis attorney Gary Hansen’s recent appointment as the administrator of the North Minneapolis TJ Waconia rental properties cemented his reputation as the go-to lawyer for handling troubled blocks of housing.
Hennepin County District Court Judge Robert A. Blaeser appointed Hansen last month, charging him with managing 141 North Minneapolis rental properties, most of which are now abandoned. The properties were formerly managed by Roseville-based Waconia, which has been accused of fraud by the city of Minneapolis and federal prosecutors.
The civil suit brought by the city, local neighborhood groups, two tenants and the nonprofit Family Housing Fund of Greater Minneapolis includes a racketeering claim seeking treble damages. The city is seeking control of the properties under the Tenant Remedies Act.
While the litigation backdrop presents a very tricky property-management situation, it’s familiar ground for Hansen, who is, in fact, a business litigator, not a real estate lawyer. Hansen previously served as a receiver in the case against Parish Marketing and Development Corp., which “flipped” more than 200 single-family homes in the south metro area.
A neighborhood issue
The city and the neighborhood groups are worried about the effect on the surrounding area if the Waconia properties are allowed to sit dormant for an extended period of time. The city hopes to gain ownership of the homes, make necessary repairs and get them back on the market as soon as possible.
At first, Hanson tried to coordinate the 40 to 45 lenders involved to sell the properties in a fashion that would lessen the impact on the community. Ultimately, he decided that strategy wouldn’t work. Instead, he tried to facilitate the foreclosure process so that the properties could get on the market as soon as possible in order to provide some stability to the surrounding area.
Hansen said he will attempt to make a similar determination with the Waconia properties. Despite what happened with Parish, there is still some grounds for hope that a coordinated approach by the lenders could work in the Waconia case. Since fewer lenders are involved, there may be other options for selling the properties, Hanson said.
“We’ll look very carefully at whether there’s a more efficient way to deal with the situation so that it’s consistent with the best interests of the community and the plaintiffs in this lawsuit,” he told Minnesota Lawyer.
Can these homes be saved?
Hansen, chair of the business litigation section at Oppenheimer Wolff & Donnelly, is expected to assign most of the management duties to Greater Metropolitan Housing Corp., a nonprofit known for building and rehabilitating housing in Minneapolis.
He will first work with the Minneapolis Inspections Division to secure the properties, then work with GMHC to help manage them. The U.S. Attorney’s office will turn over keys and all records related to the properties, which were seized from Waconia’s two owners when the suit against the two was filed.
“I will determine whether there’s any way to achieve value for the estates, and therefore for anybody who’s been victimized by this in the way we dispose of the properties,” said Hansen.
Even if it is determined that the properties have mortgage debt well in excess of their value, “I still think there’s value to be brought to all the constituents by managing the wind-down sale of the properties in a way that imparts the least possible additional injury to the constituents who’ve been harmed by this,” he told Minnesota Lawyer.
There are a number of legal issues to consider when determining the best course of action for the Waconia properties. If it’s determined that some of the properties were purchased by a “straw” owner (someone who bought property on behalf of another party for the purpose of disguising the latter’s identity), Hansen needs to determine the actual owners before a sale can be negotiated.
He must consider the rights of the mortgage lenders, and the facts regarding how the transactions were initially financed.
“There are dozens of big and small questions that float through this,” Hansen said.
The right background
Hansen’s experience in the Parish case might not be the only reason Blaeser appointed him to oversee the Waconia properties. Hansen also once headed the criminal division of the Minnesota Attorney General’s Office. Thus, Hanson has a strong background in both criminal law and complex litigation – two of the major legal areas affecting the status of the Waconia properties.
“Gary’s a very good choice for this job,” said Minneapolis attorney Mary Cullen Yeager, who is representing all the plaintiffs in the case except for the city of Minneapolis. “He has the experience of going through this process with the Parish matter, and that’s important.”
Hansen’s fee will be paid from the state Family Housing Fund, which the defendants must reimburse. Barring unforeseen litigation or the appearance of issues he feels unsuited to deal with on his own, Hansen will work alone on the case.
“It should be a straightforward process,” he said. “The properties should be marketed in an efficient, coordinated fashion that doesn’t create additional victims.”
Yeager ultimately would like to see the Waconia properties owned by a nonprofit such as GMHC that can fix them up “and put them on the market for real families.”
Hansen didn’t have a timetable for determining the best course of action for the Waconia properties, but pointed out that his work on the Parish case encompassed about five months.
“What we eventually do is going to depend a lot on what we discover as we look into this further,” he said.
