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Housing Matters in Contracts for College and University Presidents and Independent School Heads

Corporate CEOs generally do not receive housing as part of their compensation packages unless they are required to work internationally, presumably for a limited period of time.

It is different in the academic world, as executive employment lawyers who practice in the area of higher and secondary education are well aware. Indeed, it is often mandatory that a college or university president or head of an independent school (thankfully, no longer called headmaster or headmistress, terms now as archaic as titles of courtiers to Louis XIV) reside in the official president’s residence.

Indeed, the president’s house or the head’s house, is still a prominent feature of many campuses, and a new school leader is customarily expected to live there and use that residence for entertaining: students, alumni, donors, trustees, and sometimes state and local officials are invited there on school business. Such an official residence represents the dignity and continuity of institutional leadership.

The provision of obligatory housing affects the executive employment contract of the president or head of school in a number of ways, so the various terms and conditions related to the official residence are usually contained in one or more separate clauses in the new leader’s agreement.

First, even if it is mandatory that the new president or head live in an official residence, there are tax implications which must be considered, most importantly the obligation to make some allocation between the personal use of the residence, which can be viewed as a taxable “perk” of the president’s employment arrangement, and the professional use of the residence which is required by, and benefits, the school. Fortunately, most academic institutions have either inside general counsel or outside counsel who regularly represent the school (or their tax departments) who understand and keep track of this issue, both benefitting the president or head when it is legally permissible and making certain that the leader does not receive an unexpected tax bill.

Next come the various “internal” details regarding this housing issue and these concerns more often fall under the purview of the president’s or head’s own executive employment attorney.

What are some of these details?

1.     Is there going to be some transition problem as the sitting president or head moves out?

2.     And, while we are on the subject of timing, what will the contract provide by way of timing at both the beginning and the end of the new president’s or head’s term of office? How long will the new leader have to move out? Also, is that timing dependent on the circumstances of the president’s prospective departure? In this last regard, we have seen executive employment agreements for college presidents which provide that if he or she successfully reaches the end of their term or are terminated without Cause, they are given a more leisurely period of time in which to vacate the residence (often 90 but never less than 60 days) than if they are terminated for Cause as defined in their contract (then perhaps only 30 days or less). Not many university presidents or heads of independent schools end up being terminated for Cause, but in these infrequent situations, the school may, understandably, want to put an embarrassing situation behind it and “move on” as rapidly as possible. That may mean an almost forced departure from the official residence.

3.     What about moving costs, both for the incoming and (later) departing chief executive? The school often pays all or a substantial part of these costs, and that issue becomes another subject of our negotiation. These costs, which may not be meaningful if the move in question is merely local, can become a burden on the new president or head if, for example, the provost or dean of an eastern college is chosen to be the president of a school on the west coast, and has to move across country. And who pays for the storage of the new president’s goods and furniture if the residence is already furnished? The contract may need to address this issue as well.

4.     The new president’s or head’s contract should also specify that the institution will either provide, or reimburse the leader for the cost of, a certain level of household help dependent on the new leader’s individual needs. Additionally, the institution should provide the staffing, cleaning and maintenance assistance required by the president’s obligatory entertaining in the course of his or her duties.

5.     It cannot be overlooked that, like any residential building, particularly if it is an older (let alone a historic) building, the “President’s house” may be in need of repairs. It also may currently be furnished in an old-fashioned style which presents a stiff, overly formal setting, inappropriate to an age which seeks surroundings where the values of diversity and inclusion can thrive. Who pays the cost of repairs, maintenance and/or renovation? These are details (and there are others) which the experienced executive employment lawyer working in higher or secondary education must address in the new leader’s agreement.

On a personal note, I distinctly remember the sense of pride and challenge I felt as a student at Western Reserve Academy many years ago, attending the weekly meeting of a seminar in Philosophy and Religion offered only to seniors, and taught, actually run as a discussion group, by our Head of School. I still see him, a tall Lincolnesque figure named John W. Hallowell, sitting in his favorite armchair, lamplight flooding the circle of students who gathered around him, as he gently prodded us to think more deeply about Plato and Aristotle. The setting of the head’s residence lent dignity to our fledgling intellectual efforts, and still does.

About the Author

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George Birnbaum

Since 1980, sophisticated business people have relied on George to apply the meticulous preparation, attention to detail, and devotion to his clients he learned from fabled trial lawyer Louis Nizer. A graduate of Harvard College and Harvard Law School, George has over 35 years of distinguished deal-making, litigation, mediation and arbitration experience which he has used to negotiate high-stakes agreements for senior executives and select business clients throughout the United States.