Service Tenancy

Service Tenancy

A service tenancy is where an employer provides an employee with a property to live in during their period of employment.  This kind of arrangement is common for farm workers, seasonal workers or for employees who work in hard-to-staff areas. At goodGround, our Property Management team are fully equipped to manage your service tenancy and to make the process stress-free for you, allowing you to focus on the working relationship between employer and employee.

Service tenancies are like other tenancies in most ways

Service tenancies are covered by the Residential Tenancies Act. As the employer is now an employer AND a landlord, most the standard rules for landlords and tenants apply. However, there are a few exceptions to this. The first difference related to rent in advance and the other relates to the amount of notice needed to end the tenancy. We will discuss both of these in further detail below. The employer will also have obligations under the Income Tax Act 2007.

Tenancy agreements are required

As with a regular tenancy, the landlord/employer (or their property manager) must provide the tenant/employee with a written tenancy agreement. This records all the terms and conditions of the tenancy, such as how much the rent is. Even if the tenant isn’t paying any rent to live in the property, it’s still considered a service tenancy and all the rules for landlords and tenants apply. The tenancy agreement can be included as part of the employment contract however we recommend that there are separate employment and tenancy agreements.

Rent can be paid directly from the tenant’s wages

In some situations the landlord can automatically deduct the rent from the tenant’s pay. The landlord can only do this if:

  • the tenant agrees
  • it is written in the employment contract; or
  • it is in accordance with employment law.

If the landlord pays the tenant for a longer period than usual because of an upcoming holiday, they can also take rent from the tenant’s pay for that same longer period.

Ending a service tenancy

A service tenancy usually lasts for as long as the tenant’s employment. The notice period is usually different to other tenancies. As detailed by tenancy services:

“If the tenancy is a service tenancy, the landlord or the tenant must give at least 14 days’ written notice to end the tenancy if the tenant’s employment has ended or either party has given notice to end the tenant’s employment. This notice can’t end the tenancy before the end date of the tenant’s employment.

Employment law sets out the minimum rights and obligations that apply to employers and employees. Minimum rights of employees are on MBIE’s Employment New Zealand website.

Other Legal Obligations

Caravans and tents are not considered to be suitable accommodation. Accommodation should be soundly built from weatherproof materials and new buildings must comply with the Building Act 2004.

As with a regular tenancy, service tenancy accommodation must comply with the RTA changes. From 1 July 2016 all rental properties are required to have smoke alarms and all new tenancy agreements need to include a statement of the extent and condition of insulation in the property (installation of electrically conductive insulation products is banned). From 1st July 2019 all rental properties must have underfloor and ceiling insulation meeting the required standard where it can practically be installed.

Adequate facilities and amenities should be provided and accommodation should be kept clean and hygienic. Any worker accommodation should:

  • be located away from stock yards and other similar areas
  • have gutters and downpipes to carry rainwater away from the building
  • have lined and finished interior walls (timber-framed buildings)
  • have stopped and battened joins in wall linings
  • have paper, paint or varnish on wall surfaces
  • have suitable thermal insulation
  • have draught-proof floors with smooth, easily cleanable surfaces.
  • have ventilation openings in foundation walls that are covered with mesh or screened to keep out vermin
  • not have machinery and chemicals stored nearby

Further details can be found here.

Relationships

The landlord/tenant relationship can sometimes be neglected during a service tenancy as the focus tends to be on the employment relationship. To ensure that both the employment relationship and landlord/tenant relationship run smoothly, care is needed in setting expectations from the very beginning. This is where we can help. We can take away the added stress that can arise from the landlord/tenant relationship by managing the tenancy for you. This allows you to focus on the working relationship.

To find out more about how we can help with your worker accommodation and service tenancy needs, call our Property Manager on 022 3554 221.

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