Service occupancy and service tenancy
Service occupancy and service tenancy

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Service occupancy and service tenancy
  • Service occupancy or tenancy?
  • Type of property
  • Do the employee's duties have to arise immediately?
  • Can an employee carry out his own business in the premises without becoming a tenant?
  • Termination
  • What if a tenancy has inadvertently been created instead of a service occupancy?

An employee who lives in premises owned by their employer in order to perform their duties as an employee and who has exclusive possession of those premises occupies either as a tenant under a service tenancy or as a licensee under a service occupancy (or tied accommodation as it is also known). The distinction is important because, under a service occupancy, the right to terminate arises when the employment ends whereas a service tenancy will be regulated by the Housing Act 1988 (HA 1988).

Service occupancy or tenancy?

Service occupancy

Service occupancy is a licence where:

  1. it is essential that the employee lives in particular accommodation or in a particular vicinity for the better performance of their duties, or

  2. it is an express term of the employee's contract of employment that they live in a particular residence from where they can better perform their duties

The essentiality test is only satisfied if the job cannot be performed unless the employee lives in the accommodation. It does not require a term in the contract of employment because a term can be implied by the actual requirements of the job.

The requirement to live at the property must be a genuine requirement of the employment and enable the employee to better perform their duties compared with the position if there was no requirement to