When a resident is also an employee

Jan Luba QC recently reported a case that involved the housing status of a council employee who was living in a local authority property in order to do his job (Godsmark v Greenwich LBC, Case of the Week, 18 June, page 12). He was not a secure tenant because of an exception in the Housing Act but, after some changes of address and alterations in the management of the school where he lived and worked, the man claimed he had become a secure tenant and had the right to buy. The court disagreed.

Issues like this come up a lot because the law becomes complicated when your landlord is also your boss. You have very different rights depending on whether it is necessary for you to live in your home in order to do your job, or merely convenient.

Occupational hazard
The basic rule is as follows: if an employer provides an employee with accommodation because it is essential for the performance of his or her job that the employee lives in that accommodation, the employee will be a "service occupier", rather than a tenant. Similarly, if an employment contract specifies that the employee must live in the employer's accommodation because that is essential for the performance of his or her duties, or because it is necessary for the better performance of those duties, he or she will also be a service occupier.

A service occupier has fewer rights than a tenant. As a general rule, an employer will be able to terminate the service occupier's accommodation on fairly short notice, usually at the same time as the employment ends. The exact rules for termination will depend on the wording of the contracts, but the employee is unlikely to have the benefit of statutory protection as a secure, assured or assured shorthold tenant. This may also mean the occupant is not entitled to related benefits such as the right to buy.

Importantly, the status of a resident employee depends on the law, rather than what the parties state or agree between them. This is why a person's status may change from time to time.

This was the basis of the argument in the Godsmark case, where the employee had moved home twice and found himself employed by an entirely different organisation after the management of the school where he worked changed hands.

The automatic effect of the law in this area is that if an employer allows an employee to live in one of its properties, and the rules described above do not apply (because, for example, it is simply convenient, rather than essential, that the employee lives on-site), the employer may accidentally create a full tenancy, complete with statutory rights.

It will be no defence that there is no written tenancy agreement, or that both employer and employee refer to the arrangement as a licence, or a service occupancy.

The Godsmark case also raises the issue of timing. If an employment relationship does come to an end, it will be important for the employer to consider quickly the accommodation situation and take any appropriate action.

The status of a resident employee depends on the law, rather than what he or she agrees with the landlord

The arrangement may continue to be regarded by the law as a service occupancy for a short period after the employment is terminated, but there will come a point where the ex-employee's status will change and possibly attract greater security.

What about the wardens?
Resident employees also raise other issues, particularly where the employee is a warden or caretaker. For instance, an employer wrote to Think Tank last year describing a situation where a warden's husband was abusive to tenants (13 June 2003, page 47).

Resident wardens usually live in close proximity to the tenants they work with, so they require the employer to consider numerous – possibly conflicting – responsibilities. It will have to act as a responsible employer and take care to treat the employee fairly, but it must also act as a responsible landlord.

It is particularly important, therefore, that contracts relating to both employment and accommodation are clearly and comprehensively drafted.

A further concern for registered social landlords is that as a result of schedule 1 to the 1996 Housing Act, they may only make certain, specified, payments and benefits available to officers and employees.

If the grant of accommodation is not necessary for the performance of a particular job, it may be in breach of schedule 1.

Furthermore, of course, RSLs are expected to use their social housing assets for social housing purposes and will have allocations criteria to abide by.

They will also need to be clear that they are acting within the powers set out in their governing documents.