HOUSE CORPORATION SUES NORTHWESTERN UNIVERSITY

Tim Burke, Manley Burke, tburke@manleyburke.com

The Wranglers is a House Corporation that has leased a fraternity house from Northwestern University since 1916.  During that time it has provided housing to five different fraternities with its current tenant being Sigma Alpha Epsilon (SAE).  The current lease runs to 2012.

On February 13^th The Wranglers filed suit against Northwestern seeking a declaratory judgment that the University could not enforce obligations on the House Corporation that were not contained in its lease.

Northwestern has sought to require the House Corporation to pay for a new automatic sprinkler system in the house in order to meet requirements of the City of Evanston ordinance and to pay for changes to meet the accessibility requirements of the Americans With Disabilities Act (ADA).  The Wranglers estimate that the total cost to be in excess of half a million dollars.

In addition, Northwestern unilaterally began billing the Wranglers in the 2006-2007 academic year a “pillow” tax of $256.00 per bed, almost $10,000.00 in total for the year.  The purpose of the pillow tax is to assist Northwestern in paying for various services provided to the residents of the house including campus safety, student transportation and other services.

The lawsuit, pending in the Circuit Court of Cook County, Illinois, seeks a declaration that under the terms of its lease, The Wranglers is not responsible to pay for improvements mandated by the City of Evanston or to achieve ADA compliance.  Further, The Wranglers seek a declaration that it has no obligation under the lease to pay Northwestern for its “cost of operation for campus safety, student transportation and other such services” included in the pillow tax.  The Wranglers’ argument on all issues is based on precise terms of its lease which obligate The Wranglers to maintain the house but do not obligate it to make improvements (additions) to the house.  Neither does the lease make any provisions for charges such as the pillow tax.

The Wranglers last signed a lease with Northwestern for a ten-year term in 1992, but the lease also provided that it would automatically renew for an additional ten years unless, at least three months prior to the end of the ten-year term, one or the other party notified the other that it would not renew.  That did not happen and as a result the lease automatically rolled over for an additional ten years.  It appears that the University may have overlooked its non-renewal option because a few years after the automatic renewal, the University contacted the treasurer of the current tenants and asked whether they were “assuming” that the lease had renewed for an additional ten years or if they would be willing to enter into either a new opt-in or opt-out lease.

This dispute is instructive for both house corporations that enter into leases with host institutions and for chapters that enter into leases with house corporations.  Terms contained in the leases and terms which aren’t contained at all are important.  Leases should be carefully reviewed before they are entered into.  It is always wise to have an attorney familiar with local lease law review such documents.  Where house corporations lease from a college or university, it is still not unusual to find long-term 99-year or perpetual leases or leases that have renewal clauses that automatically extend a lease or terminate a lease unless one party notifies the other to the contrary.

Leases should be periodically reviewed to be certain no rights are being waived or obligations being undertaken unknowingly.  New officers in a house corporation should always ask to review any existing leases, whether with a chapter or with a university.  Chapter officers responsible for relationships with house corporations should be familiar with the lease between the chapter and the house corporation, know where a copy of it is and know what is required.