Many employers in the rural sector have employees living in accommodation which the employer owns. The status of the arrangement and the obligations on the employer as accommodation provider can vary.

Occupancy or tenancy agreement?

It is important to confirm whether the employee is an occupant or a tenant.

A service occupancy is where an employee is required to live in accommodation provided by the employer for the better performance of their duties and no rent is paid. On the other hand, a service tenancy arises when an employee lives in a house provided by the employer as part of the employment arrangements and rent is paid – this could be a full rent but is often a discounted rent.

There are also situations where an employee may rent a house from their employer but unrelated to their employment. In this situation the employee will be a residential tenant in the same manner as any other non-employee tenant of the employer.


The arrangement with the employee should be properly documented. The employment contract should state that the employee is required to live in the accommodation provided and the "rules" (including whether any payment is to be made by the employee) regarding the accommodation should be set out either as part of the employment contract or in a separate licence or lease. If a payment is to be made, the lease to the employee will be a private residential tenancy* and should comply with the requirements of such leases. Where a house is let to an employee unrelated to their employment the lease to be granted will be a private residential tenancy*.

Standard of Accommodation

Employers must keep accommodation occupied by or rented to their employees to the Repairing Standard. The Repairing Standard is set out in legislation and changes from time to time; the current standard is available on the site.

Obtaining possession of a house occupied by a former employee

Where there is a service occupancy or a service tenancy, the employee's right to occupy ends with the termination of their employment and they must vacate the property. However, in the event that the employee does not vacate, the employer must obtain an order for possession from the First Tier Tribunal. The procedure will differ depending on whether the employee paid rent (and had a service tenancy) or not (and had a service occupancy).

If an employer consents to an employee remaining in the property following termination of their employment, careful consideration should be given before any rent is accepted by the employer (as this is likely to create a tenancy in favour of the employee and there will be limitations on the employer's ability to recover possession).

If the employee's tenancy of the house is unrelated to their employment their tenancy will continue notwithstanding the ending of the employment (possession will only be able to be sought on one of the grounds for obtaining possession applicable to private residential tenancies* and it should be noted that the ground relating to obtaining possession from a former employee only relates to houses let as a consequence of the tenant being an employee of the landlord).

Accommodation offset and the minimum wage

There are set rules (the accommodation offset rules) about employees occupying accommodation belonging to employers and the influence of that on the calculation of the minimum wage. It is worth checking, therefore, that the minimum wage is being paid in such situations. The UK Government website contains useful worked examples for reference.

* If the arrangement with the employee was entered into before 1 December 2017 and rent is being paid then the lease in place may be an assured or short assured tenancy, or an older type if the arrangements predate 2 January 1988 and the applicable law will be that which relates to the type of tenancy in place.


Clare Dunlop

Senior Associate