How to stay legal when providing farm staff accommodation

Offering farm accommodation can work well for all parties. 

However, there are pitfalls to avoid when agreeing contracts and legislation governing wages and health and safety must be observed during the tenancy.

Tenancy agreements

The two main types of residential tenancy, an assured agricultural occupancy (AAO) and an assured shorthold tenancy (AST), offer hugely different levels of protection for the tenant, points out Michael Tatters, property litigator for law firm Thrings.

See also: Why a well-drafted farm employment contract is important

Assured agricultural occupancy

Under an AAO, an agricultural worker becomes a sitting tenant after 91 out of 104 weeks in the property and acquires full security of tenure.

This means the employee has a right to stay in the property beyond their period of employment.

After that period, the employee may exercise their right to stay and may be asked to pay a rent. However, this may be below the market rate.

If the protection started before 15 January 1989, under the Rent (Agricultural) Act 1976 the tenant will only be required to pay a “fair” rent, determined by a third party.

For agreements made after the 15 January 1989 Act was implemented, the tenant would have to pay the market value.

In either case, the landlord has little power to remove the protected tenant without a ground for possession under an AAO.

Even after the tenant’s death the landlord may not be able to recover the property. Occupancy rights pass to the spouse, or someone living with the tenant as husband or wife, while relatives of the tenant and the spouse may also assume long-term rights.

Providing the relative has lived in the property for two years before the tenant’s death, they too can assume occupancy rights, which could mean the property is out of the hands of the landlord for decades.

The landlord may be able to reclaim the property if, for example, the rent is in arrears, but the process may take time and incur legal costs.

Situations may be resolved with a settlement agreement – a lump sum payment or other financial incentive paid to the tenant if they vacate. Again this can be costly for the landlord and the tenants will need legal representation.

Assured shorthold tenancy

To avoid such a situation, the landlord should offer the employee an AST, says Mr Tatters. An AST is based on a fixed term, usually an initial six or 12 months. 

Thereafter, another fixed term can be agreed or the agreement automatically reverts to a rolling month-by-month contract.

When landlords want to repossess properties at the end of the fixed term, they can issue a Section 21 notice, which must give the tenant not less than two months’ notice to end the tenancy.

However, there is a significant potential stumbling block that must be avoided or the AST will be void.

The prospective tenant must be presented with a document known as a Form 9, which establishes that an AST and not an AAO agreement is in place.

Crucially, the Form 9 must be presented before the AST starts and the tenant occupies the property.

Issuing the Form 9 after the tenancy starts means the agreement will not be an AST and once the agricultural worker has been employed for more than 91 weeks they will acquire rights under an AAO.

The Form 9 should be dated, signed by both parties and a copy retained by the employer.

The copies should be carefully stored because these may be crucial if there is a need to prove the existence of an AST and in order to remove the tenant, advises Mr Tatters.

It would also be advisable to have a dated covering letter introducing the contract to the tenant.

Property condition and utilities

Prior to the start of the tenancy the landlord must provide the employee (or any other tenant) with a set of documents and certificates, says Sarah Whitehurst, a partner at Roythornes Solicitors. These include:

• An energy performance certificate (EPC), rated E or above (or C or above from 2025)
• A gas safety certificate
• The government’s How To Rent booklet
• An electrical installation condition report (EICR).

The landlord will also need to undertake “right to rent” checks, checking the tenant’s immigration status and that of any other adult occupiers of the property.

The landlord is required to have gas safety checks carried out annually and the certificate renewed.

The EPC must be renewed every 10 years and the EICR at least five-yearly.

Approved and tested carbon monoxide monitors and smoke alarms need to be fitted ahead of the tenant taking occupation.

Failure to make the documents and safety equipment available may affect the landlord’s rights to remove a tenant by preventing the issuing of a Section 21 notice.

Other legal and financial penalties may be imposed, including fines of up to £30,000 for serious breaches.

Aside from the energy certificates and responsibilities, the landlord has a statutory obligation to repair and maintain the roof, walls, drains, gutters, water supplies, heating and sanitation.

The landlord is also under obligation to ensure that the property is fit for human habitation, which requires it to be safe, healthy and free from things that could cause serious harm.

Any failings caused by these, such as rising or penetrating damp or mould, can lead to the tenant bringing housing disrepair claims.

The tenant may involve a surveyor to validate the level of work needed and then put the landlord on notice for disrepair to ensure the issues are resolved.

Until the work is completed the tenant can press for compensation in the form of a discount to the rent paid or damages.  

Until the work is satisfactorily completed, the landlord is under a legal obligation.

While the obligation is in place the tenancy is highly unlikely to be terminated, even via a Section 21 notice within an AST.

Local authorities and the courts can become involved if the work is not carried out or not carried out satisfactorily.

In extreme cases, where the health or safety of the tenant is at risk, local authorities may serve a prohibition notice. The landlord must then rehouse the tenant at cost until the house is judged to be in a good state.

National minimum wage

Natalie Ward, Thrings employment law specialist, explains that a further pitfall exists when farmers offer accommodation as part of a remuneration package.

Employers must check that the value they attach to property and deduct in lieu of pay does not breach the national minimum wage rules.

Every worker in the UK must receive at least the national minimum or national living wage, with the threshold pay levels set by the government each financial year.

To ensure these are met, the government sets a monetary value for accommodation that farm employers must use in pay rate calculations.

The amount allowed as an offset to wages by is set each year by HMRC. Currently, the offset rate is £8.70/day, or £60.90/week.

From April 2023 the offset rate rises to £9.10/day and £63.70/week.

Therefore, if the owner has deducted more than this rate, believing the value of the property is higher, the total value of the remuneration package offered may take payment rates below legal minimums. Where this is the case, the business owner may face tough penalties.

If HMRC decides the national minimum wage has not been met, the business may be issued with a notice of underpayment.

This will require the employer to settle salary arrears, together with interest on those arrears. A large penalty may also be levied against the employer, while details of the business’s breach are publicised as a deterrent.