The impact of the Renters’ Rights Act 2025 on service occupancies

A service occupancy (SO) is where an employer requires an employee to live on site in the employer’s property for the better performance of the employee’s duties.  Classic examples are a boarding school caretaker or hotel manager.

SOs are a special type of licence to occupy that sit outside of most existing property law obligations imposed on landlords and rights granted to tenants.

The new Renters’ Rights Act 2025 (RRA) introduces fundamental reforms to the private rented sector.  Changes include the abolition of “no-fault” evictions and the transition to periodic assured tenancies.

While genuine SOs (existing and new) remain outside the scope of these reforms, the RRA significantly increases the risks for employers where arrangements are incorrectly characterised. We recommend that employers review the use of all SOs ahead of the RRA coming into force on 1 May 2026.

Genuine service occupancies

A service occupancy arises where an employee is required to live in accommodation provided by their employer for the better performance of their duties. For property law purposes it is a licence to occupy rather than a tenancy. This means the employee does not enjoy exclusive possession in the same way as a tenant and the licence to occupy ends when employment ends (unless the SO agreement or employment contract says otherwise).

• General impact of service occupancies

A genuine SO remains outside the RAA because it is not an assured tenancy. However, the RRA heightens the consequences of misclassification. If an arrangement labelled as a SO is in substance a tenancy, it will fall within the new assured tenancy regime.

This creates significant risk for employers. Under the RAA, landlords will no longer be able to rely on section 21 “no fault” to recover possession and must instead establish a statutory ground for possession.  As a result, if an employee successfully argues that their occupation is in fact a tenancy, the employer may face delays, increased costs and uncertainty in recovering possession of the property.

Greater scrutiny is therefore likely to be applied to SO arrangements. To qualify as genuine, the occupation must either be essential to the employee’s duties or expressly required under the employment contract for their better performance. Importantly, proximity or convenience will not suffice. The employee’s occupation must be of “material assistance” to the employee in carrying out their duties in practice.

• Impact in the agricultural context

The risks are particularly great in the agricultural sector. Where a purported SO for an agricultural worker fails to meet the legal test, the occupier may instead acquire an Assured Agricultural Occupancy.  Such occupancies provide significantly greater security of tenure than standard residential tenancies and can grant long-term rights of tenure.

This is particularly relevant for farm workers living on site. While accommodation may be beneficial, employers must demonstrate a clear operational need, such as responding to livestock or security issues, supported by express contractual terms and reflected in day to day working arrangements.

The RRA does not prohibit SOs, but its broader strengthening of tenant protection increases the stakes of misclassification.   Employers must ensure that service occupancies are carefully structured, clearly documented and consistent with the reality of the role to avoid unintended security of tenure and reduced control over possession.

Agricultural employers face a dual risk. They may fall within the RRA’s stricter tenancy framework while also unintentionally granting enhanced statutory protection under agricultural housing legislation. Get in touch with our Employment team if you have any questions.