Otago construction boom brings responsibilities

2 Mar 20

Column written by Dunedin Partner John Farrow, published in the business section of the Otago Daily Times on Monday 3 March.

It seems that Otago is at the beginning, if not in the midst, of a construction boom. Dunedin’s hospital, school expansions, hotels and houses in Queenstown and Central Otago, and the proposed redevelopment of George St are providing much anticipated work. Not to mention a number of potential developments by the University of Otago and Otago Polytechnic and the proposed waterfront development. Work, however, requires workers and it seems that there is a shortage of workers with the necessary skills in both Dunedin and Central Otago. An estimated 1050 workers are expected to work on the hospital project alone.

Dunedin is also described as being on the verge of a housing crisis. The Mayor’s Task Force for Housing has reported that supply has not kept up with demand and an increasing population has meant that both house and rental prices have risen accordingly. In order to attract workers, employers also may need to house them. We’ve seen some initiatives recently in response to both a lack of housing availability and affordability. Real Journeys has begun building a village for its staff at Walter Peak in response to exorbitant Queenstown rents. Real Journeys chief executive Richard Lauder was reported as saying “if the only way we can employ people is to house them, then that’s what we’ll do”.

Providing accommodation for workers means that you are not only an employer but may also be a landlord. Workers’ pay can include accommodation and food. If an employer provides accommodation then, in a number of situations, it will attract the responsibilities of a landlord. There are some exceptions to this, such as where an employer arranges for a third party to provide accommodation or where it is necessary for the employee to live on-site as part of their role (“service occupancy”). A service occupancy will generally only arise where workers stay in provided accommodation while they work. An example of this is shearers’ quarters. A service occupancy arises directly from an employment relationship and forms part of an employment agreement. A “service tenancy” is separate from the employment agreement but must accord with Residential Tenancy Act provisions. These include special provisions for notice terminating service tenancies.

The Tenancy Tribunal can determine whether any tenancy is a service tenancy or not. The Residential Tenancies Act regulates tenancies and service tenancies but does not apply to service occupancies. A service tenancy is defined as “a tenancy granted under a term of, or otherwise as an incident of, a contract of service or contract for services between the landlord as employer and the tenant as employee or contractor”. A “service occupancy” arises directly from the employment relationship. The occupation of the residence in a service occupancy comes from the need to live there in order to perform the employment tasks. The occupation is an employment matter, rather than a tenancy matter.

Employers as landlords have a number of obligations. These obligations have been fortified by recent Government legislation. They include ensuring that the property is in a reasonable condition; allowing the tenant quiet enjoyment; and meeting relevant building and health and safety standards (including smoke alarms, insulation and ventilation). The new and existing legislative requirements come into effect in stages from July 1, 2019 to July 1, 2024. Employers must, so far as is reasonably practicable, maintain accommodation that they provide for their workers to eliminate health and safety risks.

Service tenancies can be terminated by either party by giving a shorter period of notice than required for other tenancies. The landlord must give a minimum period of 14 days’ notice to terminate a service tenancy if the contract of service or the contract for services has been terminated. This notice period can be shorter than 14 days where the accommodation is needed to accommodate replacement workers or where the landlord has a reasonable belief that the tenant will cause substantial damage to the property. Service tenancies can also be terminated even when employment has not ceased, however different notice provisions will apply. In situations where a tenancy is linked to employment, employers may find themselves being challenged, not only in relation to a dismissal, but in relation to the end of the tenancy.

The Government’s business website provides information on employment arrangements that involve accommodation. Employers should familiarise themselves with their obligations and responsibilities if they are going to provide accommodation in association with employment. The construction boom may be here and while it provides work and economic prosperity, it also comes with increased responsibility.

If you have any questions with regards to the above article, please contact our specialist Employment Law Team.

For more information contact:

John Farrow