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Newsletter > January 2003 > "HOUSE CORPORATION HEROES"
HOUSE CORPORATION HEROES
Robert E. Manley, Manley Burke
The unsung heroes of the Greek world are officers and trustees of house corporations. The typical house corporation owns land and a building occupied by a fraternity chapter. The officers and trustees have special duties and conflicting demands upon them.
Their special duties include the trust they have for the current members of the chapter.
They have a duty to make the house available and see that it is properly maintained for the use of the current members of the chapter. They also have a duty to the future members of the chapter to make sure that the house is useful in the long run. They also have a duty to the donors of the past and present who have provided financial resources to make the house possible.
Sometimes these duties present conflicting demands. The current actives obviously want instant gratification of their current needs. Sometimes this is inconsistent with the duties to the future members of the chapter and to the past and present donors.
Sensible trustees and officers of a house corporation do a few things to minimize friction:
- There is an effective and regular way to keep the chapter informed about the financial affairs of the house corporation. Sometimes this is done by scheduling regular meetings between the representative of the house corporation and the officers of the chapter. Sometimes an officer of the chapter serves as an ex-officio, nonvoting member of the house corporation board. In some house corporations, the members of the chapter are automatically elected nonvoting members of the house corporation and there are meetings once or twice a year at which the house corporation board meets with the
- A well-run house corporation will have a lease with the chapter that spells out the financial obligations of the chapter or of its members to provide rental payments to the house corporation. The lease also covers the duties of the house corporation to maintain the house and to provide for replacement of parts of the house systems that may need to be re placed, such as a furnace or a hot water heater. Among the provisions that should be in the lease is an agreement on the part of the chapter that it will not permit the house to be used for any purpose that is a violation of state or local law, a violation of university policies, or a violation of policies of the fraternity. This, of course, means that the lease is representing that the chapter will not provide alcohol to minors or allow drug activity in the house
The trustees and officers of the house corporation should not micro-manage the internal affairs of the chapter. They are landlords. Hopefully, the chapter has some other mature advisors who are chapter advisors. It is not wise for house corporation trustees or officers to also be chapter advisors. The chapter advisor is helping the chapter deal with its current operations. The house corporation trustees and officers are interested in protecting not only the current operations, but the future operations as well.
Some house corporations have self-perpetuating boards. This means that the members of the board reelect themselves or elect replacements for themselves at regular intervals. Other house corporations are membership corporations, which means that there are a larger group of members who vote for the trustees and the officers. The voting members usually are alumni of the fraternity who live in the community where the chapter exists. In some communities, there are not enough alumni to run a membership corporation, but in other communities it is possible. The advantage of having a membership house corporation is that it provides a necessity to get the alumni together periodically for a report on the status of the house and the house corporation and to conduct elections.
A common pathology for house corporations is that one alumnus becomes super proprietary of the house and the corporation. Other alumni are happy to have the one person take charge and run with it as long as things are going well. The problem is that often, things are not going well and no one realizes it until a real disaster happens. For example, the one person who was running things suddenly dies and no one knows the status of anything. This can be a messy thing to untangle. The one person who was taking charge of things needs money for some private purpose and “borrows” it from the house corporation. This is embezzlement under the laws of most states. The one person who is in charge hires a brother-in-law to put a new roof on the house. It may be a fair price, but if anybody finds out about the relationship between the leader of the house corporation and the roofer, it can raise all kinds of suspicions and accusations of improper behavior.
Whenever other people’s money is involved, it is of the utmost importance that the volunteer leaders of the house corporation have full and fair disclosure of all financial affairs throughout the year. Whenever the leader of a house corporation becomes too proprietary, trouble often ensues.