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Providing accommodation to employees

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What issues do employers need to consider when employees are offered accommodation as part of their employment? We explain the difference between a service occupancy agreement and a service tenancy and why it matters.

Service Occupancy Agreements and Service Tenancies

In certain types of roles, employees are offered accommodation as part of their employment. Common examples include:

·  A live-in carer or house keeper;

·  Caretakers or gardeners that live in or near to their place of work; and

·  A teacher at a boarding school.

If you provide accommodation to an employee, the arrangement is usually documented by the parties entering into either a service occupancy agreement or a service tenancy.

Understanding the difference between a service occupancy agreement and a service tenancy is essential and careful consideration should be given as to which type of agreement you should use.

What is a Service Occupancy Agreement?

A service occupancy agreement will arise where:

·  Occupation of the property is essential for the performance of the employee’s duties or is closely linked to the occupier’s employment.

·  The employment contract expressly requires the employee to live at the property for the better performance of the employee’s duties (although it may not be essential).

·  The occupier has a personal licence to occupy as long as the employee is employed by the employer and the service occupancy agreement terminates automatically when the employment contract ends.

What is a Service Tenancy?

A service tenancy will arise where:

·  An employee occupies the premises, however, this is not in order to facilitate the better performance of its duties.

·  The employee merely occupies the property as a privilege or as remuneration or similar.

·  The service tenancy agreement under which the employee occupies the premises contains provisions which are consistent with a tenancy (for example, rent is paid and the employee has exclusive possession of the property).

Why does it matter?

If, as an employer, you set out to offer an employee a job which requires them to occupy your property you will need to make sure the agreement is a service occupancy agreement and not a service tenancy.

We have seen cases of agreements which are called “Service Occupancy Agreements” but the wording in the agreement gives rise to a service tenancy. This means that, notwithstanding the fact that the employee’s contract of employment has been terminated, the employee has rights to stay in the property until the expiry of the service tenancy.

If an employee does not leave the property at the end of the tenancy, the employer will have to apply to the Court for an order to remove the employee which can be time consuming and expensive.

Getting it right will often hang on the wording used in the legal agreement. Our advice is to approach us at the outset to avoid any unwanted occupiers following the termination of an employee’s employment.