In what Dean of Students Archie C. Epps III last night termed an "unfortunate development," nine Harvard undergraduate members of the Sigma Chi fraternity recently began renting apartments in a house on 45 Mt. Auburn St..

The fraternity is planning to renovate and use the house as a club space.

Located next to the Siam Garden restaurant, the formerly dilapidated house will soon sport a new coat of blue paint and shiny brass numbers by the door. The first floor, littered with paint cans and bottles of disinfectant, is still a work in progress, but the upstairs apartments are now livable.

It is the first time members of the fraternity will have a "physical place to meet and an address to hang their shingle on," said Brian R. Barringer '88, vice president of Pi Eta Speakers Associates, the 12-member alumni board which owns and manages the property.

Barringer said the building formerly housed the Pi Eta Speakers Club, an undergraduate social organization. The Club was disbanded by its alumni board in 1990 because the board members "felt the controls of undergraduate activities were inadequate in a number of events over the years in the building."

The Pi Eta Speakers Associates are confident that activities in the house now being rented by Sigma Chi brothers will be controlled because an alumni board that manages the property exists, he said.

And although the nine Sigma Chi brothers now living in the house pay rent to Pi Eta Speakers Associates, they are distinctly separate from the defunct Pi Eta social club, according to Jon D. Doolittle '97, president of the 33-member Kappa Eta chapter of Sigma Chi.

Doolittle also said the current undergraduates have no relationship with the two Sigma Chi alumni who faced criminal charges almost two years ago for defrauding the Cambridge Rent Control Board about a building located at 14 Mt. Auburn St.

In February 1995, Keith W. Light, a former senior admissions officer and first-year proctor at Harvard, and Dr. Daniel S. Harrop, a Rhode Island psychiatrist, collaborated to purchase the building. Harrop then illegally evicted two Harvard undergraduates who were renting the house and members of Sigma Chi moved in.

After prolonged controversy, Harrop settled his case with the city. Light skipped his hearings and moved to California.

According to Barringer, the legal problems involving the two Sigma Chi alumni in the past are unrelated to the current association between Pi Eta and Sigma Chi.

Doolittle said last night that the chapter's members work hard to maintain a respectable reputation and to change people's perceptions of fraternities.

The nine students renting the apartments in the upper two floors of the house are working to renovate it. The rent they pay to Pi Eta Speakers Associates is identical to the housing cost term billed to Harvard undergraduates who live in campus housing.

They plan to eventually use the spacious first floor for Sigma Chi meetings and social events. When the chapter begins utilizing the entire house, it will pay rent to Pi Eta Speakers Associates.

Pi Eta Speakers Associates is now in the process of formalizing house policies so it can phase in undergraduate use of the entire house, according to Barringer.

But Doolittle said the Sigma Chi brothers are taking a "very cautious approach" transforming the lower level into a club space, since Harvard has strict rules against recognizing organizations such as fraternities that are single-sex and have affiliations outside the University.

"Trouble always follows those fraternities," Epps said. "I don't know why Harvard students would want to start up an organization that other universities are trying to get rid of."

There are about four other underground fraternity and sorority chapters at Harvard, according to a member of Sigma Chi