Landlordpolitics.com
   
Floyd Ruggles Forfeits Apartment Building after spending more than $100,000 to fix it up 
Floyd Ruggles and his wife, Linda, used to own more than 90 rental properties in the Minneapolis-St. Paul area. Their unhappy experience in purchasing a 20-unit apartment building at 620-622 E. Franklin Avenue in Minneapolis caused financial losses that led to their filing bankruptcy in August 1993.

During 1990, the previous owner of the apartment building at 620-622 E. Franklin Avenue received some bad publicity in the Phillips Neighborhood newspaper. The City of Minneapolis condemned and boarded up the building. Floyd Ruggles purchased the building from a real-estate partnership for $35,000 in cash and the assumption of $11,000 in taxes owing at the time of purchase.

In condemning the building, Minneapolis inspectors had issued seven pages of work orders needing to be satisfied. Ruggles estimated what it would cost to remove lead paint on the radiators and windows and complete the other orders. He paid the city $2,000 for building permits and $1,400 for inspectors to prepare a list of orders. The renovation work began in June 1991.

Troubles began almost immediately. During July 1991, vandals broke into the building twice. In the first incident, gang members broke 98 windows and vandalized numerous appliances, causing $26,000 in damage. In the second incident, the vandals removed copper piping from the building. It cost Ruggles $54,000 to replace that.

Equally troublesome was the fact that city inspectors were continually adding new work orders as they inspected the building. In early 1992, for example, they informed Ruggles that the city had adopted a new code relating to air circulation in the hallways. Equipment had to be installed to ensure that the air would circulate completely every 20 minutes. City officials were unable to say what equipment should be installed to meet that requirement; his was a test case. Eventually Ruggles found a machine of European design, costing $14,000, that would meet the code requirement.

When all work was complete, it had cost Ruggles three to four times as much to put the building back into good repair as he had originally estimated. City inspectors issued a certificate of occupancy on August 11, 1992, which meant that Ruggles could begin to admit tenants.

To avoid the kinds of mistakes with the building that the previous owner had made, Ruggles met with representatives of the Phillips Neighborhood Association. They agreed that the association would pick a resident manager for the building. On the day after the city issued the certificate of occupancy, this manager telephoned Ruggles to say that city inspectors had returned to the building and told him that Ruggles did not own the building any more. Rent collections should instead be remitted to the city, these inspectors had said.

At City Hall, Ruggles and his attorney learned that the city had confiscated the apartment building because of unpaid taxes. Ruggles had never received any tax statements. However, tax officials told Ruggles that, according to state statute, the city was not required to notify him of any unpaid taxes or impending forfeitures.

Ruggles agreed on the spot to pay all back taxes immediately. He obtained a certified check for the full amount, receiving assurances that the matter would go before the country commission and easily be resolved. A week or so later, he received the check back in the mail. If Ruggles wanted his building back, he would need to pay the full market value and not just the amount of the back taxes, he was told.

Ruggles informed city officials that he would be attending the auction for tax-forfeited properties in an effort to recover his building. It never went on the auction block. Instead, Ruggles learned that the city had sold the building to a housing non-profit, the Phoenix Group, for $2.00. All back taxes for forgiven to the new buyer. The agreement required that Phoenix Group should pay the city $200,000 after 15 years. The quit claim deed was signed by City Council members Jackie Cherryhomes (later president of the Council) and Joe Biernat (later vice-president).

Cherryhomes’ involvement with this project rang a bell. On July 15, 1992 - a month before the tax forfeiture - KSTP-TV aired a story in which Cherryhomes had called Ruggles “the worst landlord in the city” and had vowed that she would see to it that city inspections of Ruggles’ various properties in the city were intensified. Indeed, they were. Ruggles estimates that, whereas his 90 properties had generated roughly 50 pages of work orders annually before Cherryhomes’ announcement, they produced 500 pages of work orders after the announcement, mostly small items. His maintenance costs had increased from roughly $10,000 a year in 1990 to $70,000 a year in 1991.

Ruggles speculates that he had incurred the ire of Cherryhomes because, at the time of the KSTP-TV story, he had refused the request of the Joint Ministry Project (a northside community group politically close to Cherryhomes) to turn over all his financial records to them as some other landlords had done. Members of this religious organization had appeared on the front lawn of Ruggles’ home in North St. Paul to sing Christmas carols, accompanied by KARE-TV cameramen, when they made that request. Ruggles had turned them down.

At any rate, the financial beating that Ruggles took on the tax-forfeited property at 620-622 E. Franklin Avenue drained his life savings. Ruggles and his wife filed for bankruptcy in the summer of 1993. Ruggles was, he said, “both out of work and broke”.

The Phoenix Group, a housing non-profit, decided to turn Ruggles’ former building into its corporate headquarters. In addition, it converted two basement apartments into a neighborhood boxing gym. Phoenix, which has received national acclaim for its work with former gang members, rapidly acquired other properties as well.

The Phoenix Group collapsed in 1996 and has failed to rise, Phoenix-like, again. The building at 620-622 E. Franklin Avenue was razed in 1998 just as the dimensions of a housing shortage in the city were becoming clear. Floyd Ruggles, a bystander to those later events, rejoices that his own ordeal with Minneapolis real estate failed to ruin his marriage. 

Minneapolis landlord "horror stories"            Back to: MAIN PAGE


COPYRIGHT 2006 THISTLEROSE PUBLICATIONS - ALL RIGHTS RESERVED
http://www.landlordpolitics.com/ruggles1.html