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What he's saying is that the house is zoned to be used as a fraternity house.
If UD indicates that the fraternity is no longer technically a fraternity, then the house is no longer a fraternity house.
It turns into a rental property, just like an apartment. If it's not zoned to be a rental property, they have a problem.
Apparently, this house is not zoned as a rental property. Therefore, they can't rent out the rooms.
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