Where an employer provides an employee with accommodation during their employment, the arrangement is referred to as a service tenancy.
As an employer or farm owner, it is important to be aware that you must comply with the Residential Tenancies Act 1986 (Act) and you can be subject to a Tenancy Tribunal hearing with monetary penalties if you fail to comply. In particular, employers who oﬀer service tenancies need to be aware that:
- they are a landlord as well as an employer;
- service tenancies are fully covered by the Act;
- rent does not need to be payable for a service tenancy to exist;
- there are special rules covering payment of rent;
- there are special rules covering notice periods for the termination of a service tenancy; and
- there are obligations under the Income Tax Act 2007 arising from the tenancy
It is not uncommon for the terms of a service tenancy to form part of the employment agreement you have in place with an employee. However it is important that a separate Tenancy Agreement also be signed by the parties, and this has been reiterated in recent decisions in the Tenancy Tribunal.
What are your obligations as a landlord of a service tenancy?
The Act provides that a Tenancy Agreement must be in writing, and there are number of compulsory clauses that need to be included for the Tenancy Agreement to be compliant with the Act.
From 1 July 2016, landlords are required to install smoke alarms in all rental properties, and from 1 July 2019 landlords had to ensure there is adequate insulation in a property and provide supporting insulation statements to the tenants. In particular, ceiling and underfloor insulation is compulsory where it is reasonably practicable to install, and a landlord who fails to comply with the regulations may be liable for a monetary penalty.
There are also requirements to provide heating, ventilation, draft stopping, and moisture ingress and drainage. These requirements must be complied with from 1 July 2021 within 90 days’ of any new or renewed tenancy. All rental homes must fully comply with the healthy homes standards from 1 July 2024.
Additionally, from 1 December 2020, a separately signed statement with details of the property’s current level of compliance with the healthy homes standards must be included with most new or renewed Tenancy Agreements.
A Tenancy Agreement which meets the minimum requirements of the Act can be accessed from Tenancy Services. However, there are a number of important matters to include in the Tenancy Agreement and we strongly advise you to have your solicitor review your draft Tenancy Agreement and employment agreement before presenting it to your staﬀ.
Ending a Service Tenancy
There are special provisions in the Act for the notice period required to terminate a service tenancy. The general rule is that when notice is given to terminate the employment relationship, at least 14 days’ written notice is required to terminate the service tenancy. Notice to terminate the service tenancy can be less than 14 days where:
- the notice to terminate the employment relationship is less than 14 days; and
- the landlord believes on reasonable grounds that the tenant will cause substantial damage to the property if the tenant is permitted to remain for 14 days; or
- it is necessary for the conduct of the landlord’s business where the tenant was employed that a replacement employee be appointed in less than 14 days and no suitable alternative accommodation is available for the replacement worker during the period of 14 days (in which case notice must not be less than 5 days).
Notice must be in the form specified in the Act. The service tenancy cannot be terminated before the employment relationship ends.
The rural and agribusiness team at Anderson Lloyd recognises the nuances of service tenancy agreements and employment agreements and can work with you to put in place Tenancy Agreements that are eﬀective and reasonable. If you have any queries or questions give one of the team a call.
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