A federal bankruptcy judge on Thursday stopped a fast-tracked auction of the historic Leland House in downtown Detroit, rejecting the building owner’s proposed sale and delivering a temporary win for displaced tenants who said the proposed sale would strip them of their rights without due process.
U.S. Bankruptcy Judge Maria Oxholm denied a motion by Leland House Limited Partnership to sell the 22-story apartment building at 400 Bagley St. and an adjacent parking lot, after objections from the U.S. Trustee, secured creditors, neighboring property owners, and tenants represented by the Detroit Tenants Union and the Leland House Tenants Union.
The ruling immediately halts the planned auction, which was set to begin on March 9, and forces the owner to reconsider its bankruptcy strategy after months of emergency filings, tenant displacement, and an unexplained pivot from stabilizing the building to liquidating it.
It is the second time in less than two months that Oxholm has intervened in the case. In early December, Oxholm barred DTE Energy from disconnecting power without court approval and allowed the owner to get a $1.2 million loan to handle some of its debts, including a deposit of more than $57,000 to keep the power on.
Despite what was at stake, DTE Energy wanted to shut off power to the 99-year-old building sooner. Residents and housing advocates question why the city hasn’t advocated for the tenants. Then-Mayor Mike Duggan, who has received tens of thousands of dollars in political donations from DTE Energy executives, never spoke out in favor of residents. So far, Mayor Mary Sheffield, who took office on Jan. 1, is not taking a different approach, raising concerns among residents and advocates that DTE is trying to gobble up the property on a block where the utility already owns most of the land and buildings.
But on Thursday, DTE spokesperson Amanda Passage told Metro Times that the energy giant has no intention of trying to buy the Leland.
“We have no plans to pursue the purchase of Leland House,” she says.
On Dec. 10, after a power outage, the Detroit Fire Marshal ordered an emergency evacuation of the building, forcing residents to leave on short notice. The city is preventing the tenants from picking up the rest of their belongings, arguing the building is unsafe.
Tenants are asking the bankruptcy judge to intervene in hopes of preserving their leases and preventing their belongings from being removed without their consent.
In January, court filings suggest that the owner is moving away from helping residents by failing to make adequate repairs and stabilize the building. Instead, money intended for that purpose has been redirected to tenant removal, storage, and property security. A financial advisor was also appointed to assist with a sale.
Soon after, the owner asked the court to approve bidding procedures for a rapid auction under federal bankruptcy law, including approval of a $3.5 million stalking-horse bid and a $200,000 breakup fee if that bidder were outbid. A stalking-horse bidder sets a floor price for an asset being sold through bankruptcy
The proposed sale also attempted to include an adjacent parking lot that is not owned by the debtor.
The U.S. Trustee, a federal watchdog in bankruptcy cases, objected to the stalking-horse fee, saying it is excessive and could chill bidding. Secured creditors argued the opening price was too low. Owners of the neighboring lot said the debtor had no authority to sell their property. And tenants argued that their unexpired leases could not be wiped out through a sale “free and clear” of their rights.
At the hearing Thursday, the court questioned the debtor’s authority to sell non-estate property and raised concerns about valuation, structure, and the proposed bidder protections.
Metro Times is awaiting a response from Luis Ramirez, who represents the Michael Higgins Trust and the Leland House ownership. He has declined to comment on the case in the past.
Tenant advocates called the ruling an important pause.
“This decision gives tenants breathing room and ensures that any future sale of the Leland House cannot happen behind closed doors or at the expense of the people who lived there,” the Detroit Tenants Union said in a statement after the hearing.
The court left open the possibility that the owner could return with a revised sale proposal.