Legal advice: Service Occupancy and Tenancy Agreements

Jenny Yu
By Jenny Yu May 12, 2018 07:39 Updated

This guidance from the National Golf Clubs’ Advisory Association (NGCAA) looks at the legal issues golf clubs need to consider if they own or lease land.

The extent of property held by a golf club can very often include residential flats and houses, invariably occupied as a home by an employee of the club. It is important to ensure that any rights of occupation granted to that employee are on terms which allow the club to bring the arrangement to an end as easily as possible and, ideally, to coincide with the termination of employment. This article looks at the different ways of dealing with occupation of employees.

Service Occupancy Agreements

The ideal arrangement with employees is to grant a correctly drafted Service Occupancy Agreement (‘SOA’) which is not a ‘tenancy agreement’. A tenancy creates a landlord and tenant relationship between the club and the employee but the SOA is a permission or temporary licence to occupy the property for so long as the employee is employed by the club. A tenancy would grant the tenant the right to exclusive possession of the property during a fixed term but under SOAs occupation by an employee cannot be ‘exclusive’ as it is perceived to be shared with the employer even though nowadays SOAs are granted in respect of properties that employers don’t physically occupy themselves.

For the SOA to terminate at the end of the employment of the occupier, the SOA must expressly state that this will happen. It is also important that no terms are used which would give the characteristics of a tenancy: no use of the word ‘tenancy’ or ‘exclusive possession’ and no mention of a ‘rent’.

Finally an essential characteristic of a SOA is that there must be a strong connection between the employee’s occupation of the property and the performance of the employee’s duties under the employment contract which is evidenced by either:

  1. i) the existence of an obligation on the employee to live at the property as it is essential for the performance of his / her duties under the employment contract or
  2. ii) the existence of an obligation on the employee to live at the property for ‘better performance’ of the employees’ duties even though it is not essential.

To satisfy either of these heads it is advisable to set out the obligation in the employment contract rather than relying on a court deciding on the facts that the obligation was there.

‘Licence fees’ (the equivalent of ‘rent’ payable under a tenancy agreement) are not usually charged under SOAs – the occupation of the property is either at no charge as a ‘benefit’ of employment or rather any fees are deducted from the salary payable under the employment contract. Under SOAs, as with tenancies, the contracts for the services between the employee and the utility providers for telephone, Wi-Fi, gas, electricity, water and so on are usually stated in the SOA to be payable by the employee, but there is no reason why a club could not pick up some or all of those charges.

If an employer wishes to determine an SOA prior to the end of an employee’s employment contract (because alternative accommodation is being provided or because the employment no longer requires the employee to live at the property) this can be done by including provision in the SOA to terminate the SOA on four weeks’ notice being given by the employer to the employee. This must be compatible with obligations on the employer under the employment contract.

The alternative – tenancy agreements

If a ‘tenancy’ of a club’s property is granted (intentionally or unintentionally) then this is not an SOA and does not automatically terminate upon termination of the employment contract. If a tenancy arises unintentionally due to drafting errors in an SOA then the characteristic of this arrangement will depend on the facts in each case.

If it is intentionally granted to an employee, a tenancy should be granted in the form of an Assured Shorthold Tenancy Agreement (‘AST’) to ensure that the employer, as landlord, can recover possession at the end of the fixed term as quickly as possible.

An AST grants to a tenant a minimum fixed term of six months’ possession and the landlord must give a minimum of two months’ clear notice to terminate the AST, the earliest termination date being the last day of the fixed term. So if the employment contract was terminated in month two of an AST, the employer could not terminate the AST until the end of the fixed term, that is at the earliest at the end of month six by giving two months’ clear notice to end on the last day of that fixed term (unless there had been a serious qualifying breach of the AST by the employee and an application to court can be made for a possession order within the fixed term.)

If the AST is not terminated at the end of the fixed term then this ‘holds over’ on a month to month basis and must be terminated by the landlord, serving two months’ clear notice.

Importantly, a notice to terminate the AST must be in a prescribed form and served separately to any notices regarding the termination of employment. It should also be noted that there are statutory obligations on landlords to make available certain information to tenants at the beginning of the tenancy; failure to do so will invalidate any notice to terminate the AST at the end of the fixed term by the employer and would have to be put right before a further notice could be served. That information comprises: an Energy Performance Certificate; a copy of the governments’ ‘How to Rent’ booklet; a current CP12 gas safety certificate and information relating to the Tenancy Deposit Scheme used – if indeed a deposit is taken.

Terminating Service Occupancy Agreements and tenancy agreements through the courts

If the employee under a SOA does not leave the property upon termination of the employment contract then the possession procedure that the employer can pursue straight away is as against a ‘trespasser’ where only a minimum of five days’ notice of the court hearing needs to be served on a trespasser.

If an AST is correctly granted and the tenant does not leave the property at the expiration of the notice to terminate from the employer, a minimum of 28 days’ notice of the court hearing must be given to a tenant under the accelerated possession procedure available to landlords of Assured Shorthold Tenancy Agreements. The accelerated possession procedure can take up to two months to obtain possession.

It is worth noting that if an employee makes a claim for unfair dismissal and reinstatement following the termination of an employment contract where possession proceedings have been commenced by an employer, a judge may decide to adjourn the possession proceedings until the determination of the unfair dismissal claim.

Conclusion

A correctly drafted SOA is the ideal arrangement between members’ clubs and their employees as this allows certainty and control over the occupation of property in tandem with employment status.

The NGCAA provides support, advice and guidance – from start to resolution – on all legal matters impacting upon both proprietary and private members’ golf clubs. 

 

Alistair Smith, the chief executive, is based in the office and is on-hand to offer advice and support. 

The National Golf Clubs’ Advisory Association (NGCAA)

The Threshing Barn, Homme Castle Barns,

Shelsley Walsh, Worcestershire, WR6 6RR

Tel: 01886 812943

email info@ngcaa.co.uk

www.ngcaa.co.uk

 

Jenny Yu
By Jenny Yu May 12, 2018 07:39 Updated
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