Service tenancy
In a service tenancy, an employer provides accommodation for a worker to live in during their employment.
Service tenancy agreements
All service tenancies need a written tenancy agreement. Even if the tenant doesn’t pay rent, it’s still a service tenancy. The tenancy agreement can sometimes be part of the employment contract, but it’s better if they’re separate.
Residential tenancy agreement template
The Residential Tenancies Act 1986 (RTA) applies to service tenancies. Landlords and tenants are responsible for meeting their obligations under tenancy law. For landlords, this includes ensuring the property is maintained to a reasonable standard, has appropriate working smoke alarms, meets health and safety requirements, and is compliant with the healthy homes standards by the correct deadline. Landlords must also provide the tenant with certain information and statements, including an insurance statement, insulation statement and healthy homes standards compliance statement.
Rent can be deducted from the tenant’s wages
The landlord may deduct the rent directly from the tenant’s pay each week or fortnight. They can only do this if:
- the tenant agrees
- it is in the employment contract, or
- it complies with employment law.
If there is a longer pay period (eg due to a holiday), the landlord can deduct the rent for that same longer period.
Ending a service tenancy
A service tenancy normally ends when the tenant’s employment or engagement ends or is transferred. The notice period is different to other tenancies in these circumstances but otherwise the normal rules would apply.
If the tenant's employment is ending
The landlord or the tenant must give at least 14 days’ written notice to end the tenancy. This notice can only be given if the tenant's employment has ended or either party has given notice for it to end.
In some situations, if the tenant’s employment has ended the landlord can give less than 14 days' notice. This also applies if the tenant is transferred with less than 14 days’ notice. This can only happen if:
- the landlord has reason to believe the tenant will substantially damage the premises if they stay for the full 14 days
- the landlord’s business needs to have a new employee in place in less than 14 days. There must be no other accommodation available for that employee during the 14 days.
A notice to end the service tenancy in the above situations cannot take effect before the employment or engagement ends or before the transfer occurs.
If the tenant's employment is continuing
If the tenant wants to end their tenancy before their employment has ended, they must give 28 days' written notice.
If the landlord wants to end the tenancy before the employment agreement ends, they must give written notice as they would for a periodic tenancy.
A service tenancy can be ended through an application to the Tenancy Tribunal for rent arrears, anti-social behaviour or for physical assault by the tenant.
Options for providing accommodation for your employees
As an employer, you may wish to provide accommodation for your employees while they are employed with you. To obtain a property to use for a service tenancy, you could enter a lease under the Property Law Act 2007 for a property with the property owner with the intention of providing that property for your employees to live in.
- This initial arrangement between the landlord (property owner) and the sub-landlord (the employer) is not covered by the RTA. We recommend you seek legal advice before entering this type of arrangement to ensure it suits your circumstances.
- Once you have entered into a lease under the Property Law Act 2007 with the property owner that allows you to rent the property to your employees you will be able to enter into a residential tenancy agreement with your employee(s), signed and in writing. You become the landlord, your employee becomes the tenant, and the agreement is covered by the RTA. Any bond collected must be lodged with Tenancy Services. Generally, this type of agreement will be a service tenancy.
- If your lease agreement with the property owner were to end (for example at the end of a fixed term agreement) you could give notice to end the tenancy with your tenant, even if they are still employed with you. A landlord can give 90 days’ written notice to end a periodic or service tenancy if they are not the owner of the premises and their interest (in this case the lease under the Property Law Act 2007) in the premises is due to end.
Example
A restaurant owner in Hastings has hired someone who is new to town. They want to help their new employee by finding accommodation for them until they get settled. After seeking legal advice, the restaurant owner enters a fixed term lease under the Property Law Act 2007 on 1 September with a local family that has a home nearby they normally leave vacant between their family holidays. This agreement allows the restaurant owner to rent the property to their employee who becomes their tenant in a service tenancy. As a good employer and landlord, they explain to their employee the situation and when that accommodation would come to an end. They also ensure they give proper notice in time to meet the requirements to pass the property back to the owners under the lease under the Property Law Act 2007
The lease under the Property Law Act 2007 is due to end on 31 March, which means that the landlord’s interest in the property ends on this date and they can give the tenant 90 days written notice in advance to terminate the tenancy on 31 March. After the tenancy is terminated, the employee continues to work at the restaurant but moves to a new periodic tenancy that they have set up with a new landlord.
Other options for providing accommodation for employees
Other options for providing accommodation to your employees include:
- Purchasing a property to use as accommodation for your employees (and possibly others). This can be rented out as a service tenancy. Depending on the size of the property you could consider renting out the whole house, on a room-by-room basis or operate it as a boarding house.
Boarding houses - Rent or lease cabins to provide accommodation (if appropriate). These can be rented out as a service tenancy.
- If you are a large employer, you may wish to consider setting up barracks or a hostel to house your employees. This type of accommodation is excluded from the Residential Tenancies Act (RTA) unless you choose to contract in.
- You can choose parts of the RTA to contract into. If you choose this approach, you should seek legal advice about which parts or provisions you are choosing to contract into with your tenants.
- We also recommend talking to your local council about any local rules that may apply to this type of accommodation.
- If you are a Recognised Seasonal Employer (RSE) then there are specific criteria that you need to adhere to.
Recognised Seasonal Employers list(external link) — New Zealand Immigration
Last updated: 04 July 2023
