Lease on house at UA put to panel

Fraternity argues termination illegal

The University of Arkansas at Fayetteville “unlawfully terminated” its lease with the Alpha Gamma Rho fraternity house, which was bulldozed in 2009 and replaced with a parking lot, the state Claims Commission was told Thursday.

Christy Comstock, who represented the fraternity in the hearing, asked the commission to award the group, also known as the Arkansas Alumni Chapter of Alpha Gamma Rho Fraternity Inc., $608,000, what she called the fair market value of the leasehold.

The lease was originally to end in May 2095.

The fraternity “occupied a very prominent place on campus and had done so since the 1960s,” Comstock said. “If location, location, location establishes values in the real estate market then the [fraternity’s] spot was second only to Old Main or perhaps third if you counted Razorback Stadium.”

The commission heard about four hours of testimony and did not immediately make a decision in the case.

In 1959, Alpha Gamma Rho signed the property on which its house was built over to the university so it could receive interest-free bonds to build. The fraternity entered into a 99-year lease agreement in 1997, retroactive to June 1, 1996.

Among other things, the fraternity agreed to pay rent to cover the cost of “ordinary maintenance and essential repairs,” according to the lease.

The university said the fraternity failed to properly maintain the property, allowing it to fall into disrepair.

And when the university paid to fix some of the problems, the fraternity failed to repay the money.

In 2009, the university sent the fraternity a letter stating that it owed $434,302, including $257,793 for a safety renovation project that the University of Arkansas Foundation loaned money to pay for, and $146,163 for construction on a retaining wall.

After several discussions, during which the university offered to give the fraternity a new site or work out a debt-forgiveness deal, the universityinformed the fraternity it had defaulted on its lease.

The fraternity moved out, and the building was razed because of the high cost to repair it, said Daniel Pugh, the university’s vice provost for student affairs and dean of students, who testified for more than an hour Thursday.

Scott Varady, associate general counsel at the university, told the commission that it was a “simple case,” where the university was forced to take action to recoup its money.

“This is really a case about a tenant who didn’t meet its obligations under the lease, who received notice of those alleged violations, who didn’t do anything really to address them, and the university then terminated the lease,” Varady said.

Comstock contended that the fraternity was essentially forced out so the university could claim a valuable piece of property. She said the fraternity attempted to work with the university, but in the end could not please senior officials.

The fraternity “contends that the violations that [the university] set forth were not specific, they weren’taccurate, they didn’t give a specific way in which they could be cured,” Comstock said.

The fraternity said it retains an interest in the valuable piece of real estate, in part because its members originally purchased it.

Northwest Arkansas, Pages 7 on 01/11/2013

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