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A Stanford alumni corporation that provided housing to the Sigma Chi fraternity is suing the university for $50 million, alleging that it violated its own founding grant by not renewing the fraternity house’s lease in 2023.
The Alpha Omega House Corporation has leased the property at 550 Lasuen Mall from Stanford since 1937 to house around 43 students in Sigma Chi. Shortly after the university’s founding, Jane Stanford authorized the university to lease land to student associations and faculty with the idea of creating a residential campus. At one point, the AOHC said there were more than 30 ground leases for student associations — but by the 1980s, Sigma Chi was the last privately-owned fraternity house standing.
“We are not adverse to Stanford. Our lawsuit is premised upon Mrs. Stanford’s wishes. Her wishes were ignored here. We are supporting the Founders. It’s the Trustees who are adverse to Mr. and Mrs. Stanford’s wishes,” AOHC Board Member John Martin said in a statement.
The AOHC and Stanford signed a new agreement in 1976 with the joint understanding that the lease would be “renewed indefinitely” as long as the students “remain active” on campus, according to the lawsuit. It also stipulated that Stanford would “utilize best efforts” to rehouse Sigma Chi and AOHC if the lease was ever not renewed.
After at least seven students were allegedly drugged at a house party, Stanford’s Sigma Chi chapter was temporarily suspended in 2018, and the university used the house for a coed residence and declined to renew the fraternity’s lease the following year. The suspension remained in effect until June 2021.
“Stanford did not believe that indefinite continuation of a lease was appropriate in light of these issues,” the university said in an August 2023 statement.
At the time, however, the AOHC alleged that “no reason was given for not renewing” the lease, according to the lawsuit filed on Aug. 28 with the Santa Clara County Superior Court.
The AOHC and the university sued each other in 2019 and settled both suits in March 2021. That settlement, while not available publicly, stipulated that the university would continue to use the Sigma Chi house for coed residence through the 2022-2023 school year and would not terminate the lease with AOHC before Sept. 1, 2023.
While there was no guarantee that Stanford would renew the lease, the settlement agreement acknowledged that AOHC would ask the university to renew it.
“At this point, the AOHC had no express indication that the Ground Lease would not be renewed as stated in the Ground Lease itself. If not renewed, the AOHC understood that best efforts would be utilized to provide the AOHC and its students with another House in which to operate,” the lawsuit reads.
On Aug. 23, 2023, then-Stanford Provost Persis Drell told the AOHC that the lease would not be renewed.
The AOHC alleges in the lawsuit that Stanford did not use best efforts to find alternative housing for Sigma Chi — but Stanford said it doesn’t have to based on the 2021 settlement, citing the fact that it originally declined to renew the lease back in 2019 following Sigma Chi’s suspension.
“Even in the absence of the Settlement Agreement, the lease does not require that Stanford provide another house because, at the time that Stanford gave notice that the lease would not be renewed, there was no Sigma Chi chapter at Stanford and 550 Lasuen no longer was used as a residence intended primarily for active Sigma Chi members,” Stanford wrote in the August 2023 statement.
Stanford argued that it is inequitable for Sigma Chi to be the only Greek life organization to have its own house on campus, while the remaining 24 associations must draw straws every four years for a chance at one of 10 available houses. In its August 2023 statement, the university said that the housing allocation process exists “to promote an equitable and fair opportunity for housing across all Greek organizations.”
Now that Sigma Chi’s suspension is over, the university advised the fraternity to enter into that housing allocation process. A new cycle begins on Sept. 29.
However, the AOHC is arguing in its latest lawsuit that the equity argument puts the university in violation of the founding grant amendments from Jane Stanford. Changes to the founding documents have been made in the past, but require court approval.
“The Provost’s explanation for the non-renewal made clear that the University was ending ground leases to student associations that was called for in the Founding Documents,” the press release from AOHC states. “The AOHC contends such a change from the Trust directives required Court approval. No such approval was obtained.”
The AOHC is now seeking at least $50 million to cover the cost of building an identical Sigma Chi house in the surrounding neighborhood, according to the suit.
“Stanford was disappointed to see that a new lawsuit was filed concerning the house at 550 Lasuen. We believe that that this matter was resolved in a settlement agreement in 2021,” the university said in a statement Monday.
“We recognize the value of Greek organizations in student community life and have worked actively with current students to ensure support for a vibrant array of fraternities and sororities as well as other social organizations.”
As of publication, Stanford has not filed anything with the Santa Clara County Superior Court for this case.
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What is a bit unclear in this article is that the lease in question is a land lease. The fraternity owns and paid for the building – the fraternity house itself. The university owns the land the house is built on. The university declined to renew the land lease, and as such they took the house that the fraternity has spent $50MM building and maintaining over the years, without any compensation to the fraternity.