The Court considered the issue of tied accommodation in the recent case of Hertfordshire County Council v Davies.

Background

Mr Davies moved into a school bungalow owned by Hertfordshire City Council (Council) upon becoming the school caretaker in January 2003. He had exclusive possession of the property and was later dismissed in June 2015 for gross misconduct. However, he would not vacate the property following his dismissal. The question for the court was whether or not Mr Davies had a claim for possession after the termination of his employment.

The High Court held that although the Council no longer ran the school, and did not require the school bungalow for another caretaker, the Council were entitled to possession of the property upon termination of the employment. This was because it was clear that the agreement between the parties amounted to a service occupancy agreement meaning exclusive possession of the property pertained to the employment contract and not the tenancy. The Defendant was therefore required to vacate the property.

Implications

This case shows that it is possible to grant exclusive possession of an Employer’s premises to an Employee without creating a tenancy.

However Employers should be aware how this can be done, and understand the distinction between a service occupancy and a service tenancy. The former will provide an Employee with the right to occupy the property during the term of their employment, and will automatically end without notice upon termination of their employment. The latter will be regulated by the Housing Act 1988 and rights of occupier will depend on type of tenancy.

To avoid any potential disputes, Employers should ensure that the agreement makes it clear that the Employee is occupying the property as a licensee under a service occupancy agreement rather than as a tenant under a service tenancy. Premises under service occupancy are deemed to be vicariously occupied by an Employer, meaning the Employee does not have any interest or estate in the premises in comparison to service tenancies, and an Employee would therefore have no rights to remain in property after termination.

However, Employers should be mindful to the fact that if the occupation of the Employee satisfies the normal requirements as a tenant, then the occupation may be deemed to be a service tenancy regardless of fact that the agreement might expressly claim to rebut the creation of a tenancy.

Key points to indicate that an agreement amounts to a service occupancy are:

1. There is a requirement for an Employee to live in a particular accommodation or in particular vicinity;
2. The Employee’s occupation of that property is to facilitate better performance of their duties as an Employee (this therefore does not include cases where an Employee is occupying a property as a privilege / remuneration / similar)
3. That the Employer retains management and control of the property and has right of entry to the property at all times; and
4. Where the Employee has exclusive possession of premises it occupies it as a licensee only and there is no intention to create a tenancy.