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It has long been common for workers working in rural or isolated areas to be provided with accommodation during their employment, but we are also now seeing this type of arrangement increasingly being offered as a perk of the job in all types of occupations and locations.

Queenstown is one example of a town that is struggling to attract and retain staff due to a lack of accommodation available.  We often see employers who offer accommodation neglect the Landlord / Tenant relationship, focussing purely on the employment relationship.  However, employers have legal obligations as landlords to meet where they provide an employee with a property to live in during employment.

Service Tenancies

Landlord employers must provide the tenant, their employee, with a written tenancy agreement.  This is called a Service Tenancy Agreement, and is covered by the Residential Tenancies Act 1986 (Act).  It records all the terms and conditions of the tenancy and can form part of, or be separate to, the individual employment agreement.

The law governing tenancies apply per the Act, but service tenancies also have special rules allowing the parties to agree that the rent can be automatically deducted from the employee’s pay each pay period, where this is recorded in the employment agreement, avoiding unnecessary transferring of money between the parties.  The value of the accommodation can then also form part of the employee’s total remuneration.

There are also special provisions in the Act for the notice period required to terminate a service tenancy, so that instead of the usual 90 days’ written notice to end a residential tenancy, when notice is given to terminate the employment relationship a minimum of 14 days’ written notice is generally required to terminate the service tenancy at the same time.

Although the service tenancy cannot be terminated before the employment relationship ends, a shorter notice period can be provided if the employer:

Believes on reasonable grounds that the tenant will substantially damage the premises if allowed to remain for 14 days; or
Needs to accommodate a replacement employee and no other suitable accommodation is available during that period.
The service tenancy agreement may also provide that where the employee is not receiving a wage or salary but remains in the accommodation (such as where they are on unpaid parental leave, extended time off work for an illness or whilst on ACC), they must pay rent.

For any tenancy commencing after 1 July 2016, information about insulation installed in the ceilings, floors, or walls together with details of the location, type, and condition of all insulation must be set out in the tenancy agreement

Reminder for our Clients

To ensure that both the employment relationship and landlord/tenant relationship run smoothly, care is needed in setting expectations from the very beginning.

Having a written Service Tenancy Agreement not only ensures that you comply with the law but is useful as it sets out clearly the obligations of all parties from the outset of the relationship.  Please contact us for more advice on this issue.

Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.

June 2017