What is ‘Service Occupancy’?
Service occupancy is where an employer requires an employee to live in a specified property in order to perform their job better. Employees often include agriculture staff, caretakers, hotel managers and teachers at residential schools. The employer gives the employee a personal licence to occupy the property for as long as the employee is employed by the employer.
What is Required for a Service Occupancy?
Employers who wish to provide service occupancy to their employee(s) must satisfy the following key points:
- Occupation of the property is ‘closely linked’ to the occupier’s employment. In order to be ‘closely linked’, one of two tests must be satisfied. Firstly, the occupation is essential to perform the duties. Alternatively, the employment contract expressly requires the employee to live at the property for better performance of their duties (even though it may not be essential);
- The occupier has a personal licence to occupy the accommodation so long as the employee remains employed; and
- The service occupancy terminates when the employment contract ends.
It will always be best practice that the terms of the service occupancy are outlined in a service occupancy agreement which should appropriately cross refer to the employee’s contract of employment. However, it is important to know that even if an agreement is not drafted to outline the specifics of the service occupancy, this does not stop the courts implying that a service occupancy is taking place if it believes there is one.
Service Occupancy: Q&A
Could a service occupancy agreement be used for a farm worker occupying a cottage on a farm?
Yes, but this is only likely in very limited cases and depending on the duties carried out by the farm worker. For example, a shepherd tending sheep on a remote hill is likely to be essential to the performance of the shepherd’s duties. However, in most cases we come across, it is arguable that the occupation is not essential for the performance of the agricultural worker’s duties.
The risk for the employers who may require repossession of their property for any reason, is that this could result in an assured agricultural occupancy under s.24 of the Housing Act 1998, which gives the occupier security of tenure. Therefore, in such situations, it could be safer to simply grant an assured shorthold tenancy (“AST”), which contains less barriers for evicting tenants. Before granting an AST to an agricultural worker, the landlord should serve the prescribed form of notice on the tenant to prevent the tenancy becoming an assured agricultural occupancy.
Any kind of tenancy is different to occupancy because a tenancy gives the employee an interest in the property, rather than just a license to occupy it. Therefore, under a tenancy, the employee’s right to live in the property will not automatically end when employment ends; depending on the type of tenancy, the appropriate procedures need to be followed to regain possession. However, a service tenancy can still be granted in return for an employee’s services, with no rent payable.
Seek Professional Advice
As you can see, it is important to seek legal advice on the employment and property aspects from the outset so that both the employer and employee know where they stand in respect of any accommodation.
The importance of well-drafted documentation cannot be underestimated and can deal with terms like protection from damage to the property, upkeep, alterations, removing contents, provision of immediate family to occupy to premises and, very importantly, the employer or employee’s ability to give notice to vacate earlier than the agreed termination. It is still possible in service occupancies to have provisions in place to end the licence prior to employment being terminated. However, employers should be mindful that they do not place themselves at risk of discrimination. For example, removing an employee’s right to occupy premises during maternity leave, on the basis that she is not actively working, would in our view be likely to constitute discrimination under the Equality Act 2010. This is because the reason the accommodation is being taken away is due the employee’s maternity or pregnancy.