Service occupancy or tenancy?

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

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

Service occupancy or tenancy?

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 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 tenancy will be regulated by the Housing Act 1988 (HA 1988).

Service occupancy or tenancy?

Service occupancy

Service occupancy amounts to 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.

Where an express term is relied on, the question whether the test of requirement to occupy has been satisfied must always be determined by a consideration of the substance of the agreement and not by use of particular terms. The requirement to

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