An employee's occupation of property held by an employer may be under one of the following (whether by written or oral agreement):
A service occupancy agreement is a permission/licence to occupy a property for so long as the employee is employed by the employer. A service occupancy arises where an employee is occupying a property for the better performance of its duties, or where it is an express term of the employee's contract of employment that they live in a particular residence, from which they can better perform their duties.
Key points indicating that an agreement amounts to a service occupancy include:
If the agreement is not a service occupancy agreement (for example because the employer does not require the employee to live in a property for the better performance of its duties), but the employee does not have exclusive possession of a property (perhaps because the employee shares occupation of a property with others), then the employee may be occupying under a different form of licence to occupy.
If the employee:
then the employee may occupy a property under an assured shorthold tenancy.
Employers ought to be aware of the difference between a service occupancy, alternative forms of licence and an assured shorthold tenancy, as this has implications for how the occupation can be brought to an end on termination of the employee's contract of employment.
Under a service occupancy, subject to anything to the contrary in the service occupancy agreement or employment contract, the right to occupy a property ceases automatically on termination of employment, without a notice to quit being required, and the employee must vacate immediately.
Under an alternative form of licence, the employer will need to serve notice to terminate the licence in accordance with any express notice period agreed or, in the absence of any express agreement, reasonable notice to bring the licence to an end will be required.
Under an assured shorthold tenancy, the tenancy will not automatically end when the employment terminates and the employer will have to follow the correct procedures for recovering possession of the property. If the tenancy is oral or a written agreement and the fixed term of the agreement has ended, this requires giving the employee at least two months' notice to quit. If the fixed term of the tenancy has not ended and is continuing, then the employer will have to wait until the fixed term of the tenancy has expired before serving notice.
If an employee does not vacate by the end of the requisite notice period, or as required when the employment contract comes to an end, then it may be necessary to issue court proceedings to obtain an order for possession, as simply changing the locks to exclude the employee from a property could be a criminal offence under the Protection from Eviction Act.
To avoid potential disputes, employers should ensure that they agree terms in writing to ensure that their occupancy agreements make it clear that the employee is occupying a property under a service occupancy agreement.
Employers should be mindful that if the occupation of the employee satisfies the normal requirements for an assured shorthold tenancy, then the occupation may be deemed to be an assured shorthold tenancy, regardless of the fact that the agreement may be labelled a service occupancy agreement. Questions over the nature of an occupier's status are very common and it is not always clear from the face of the documents what status the agreement has; it is the substance of the rights and obligations of the employee under the agreement which determines the basis of the employee's occupation, rather than what the agreement is called.
Careful consideration must, therefore, be given to the terms on which the occupier will be allowed into occupation. A correctly drafted service occupancy agreement will give an employer certainty and control over the occupation of property in tandem with employment status, and avoid any potential delays and costs in recovery of property.
Through our strategic partnership with Ward Hadaway law firm, Ward Hadaway have a team of Property experts who can help you draft a service occupancy agreement and can also help you to avoid the pitfalls of an assured shorthold tenancy inadvertently arising. Alternatively, if you have an employee who will not leave accommodation and you need advice on the basis of the employee's occupation and the procedure for obtaining possession of a property, the team can assist you with this.
This article has been drafted on esphr’s behalf by Ward Hadaway Law Firm. Ward Hadaway Law Firm are one of esphr’s strategic legal advisory partners and provide certain services to our customers through a range of different Legal and HR support services offered by ourselves to the Corporate market. The content of this article does not constitute legal advice and it should not be relied upon. Specific legal advice may be required to address your specific circumstance.