What does leasing a house have to do with anything here? Is that their operation?

An S Corp has one or more shareholders. They might work for the entity, which makes them shareholder-employees. Example:

An S Corp might be a property rental operation. They source the real estate from the owners, under lease agreements. Or, there is "leased" property from the owner, their own shareholder, as in self-storage. The Operations, then, as property manager, is a nonpassive operation. They do the work, hire others or contract for services and have to manage the operation.

Details always help.