A partner at Farrer & Co, a law firm specializing in rural estates and landowners, has identified a new challenge arising from the Renters Reform Bill.
James Maxwell, in a post on the firm’s website, highlights that estates have been able to lease accommodation to employees under Assured Shorthold Tenancies for the past 25 years, confident in their ability to regain possession quickly through Section 21 notices when the employment ends.
However, with the proposed Renters Reform Bill seeking to abolish Section 21 notices and introduce a revised ground for possession, this established practice faces uncertainty.
Maxwell highlights the challenges brought about by the Renters Reform Bill, stating that it will become more challenging for estates to evict former employees residing in Assured Shorthold Tenancies (ASTs) when there are urgent reasons for their swift departure. He suggests that estates should explore alternative arrangements, such as service occupancies, where an express term in the employment contract requires employees to live on the property for better job performance, ensuring it is a genuine requirement and not a mere pretext.
However, implementing service occupancies may have drawbacks for employers with tied accommodations. Validating an employee’s need to live on-site may result in lower rent charges. Additionally, certain agricultural workers with tied accommodations may have some security of tenure due to existing legislation related to farm work.
Maxwell concludes by advising estates to review their existing service occupancy arrangements to ensure their suitability and consider implementing service occupancies for other staff in the future.
This could result in a trade-off situation where opting for a service occupancy arrangement makes the process of reclaiming possession easier. However, it may come at the cost of reduced rental income, and the employee might be required to pay income tax on the accommodation benefit through PAYE, unless they meet HMRC’s criteria for better performance. You can read the complete article on the Farrer & Co website here.
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