Rhian Radia, Partner, and Mark Chick, Senior Partner at Bishop & Sewell discuss the possible employment implications of purchasing the freehold of a property.

When considering purchasing the freehold to your property you may also need to consider whether there are any employment issues which may arise. Property and employment are two areas of the law which often overlap and this sometimes happens unexpectedly.

Employees to Consider

Behind the bricks and mortar, buildings often have employees who either work directly in the building (such as a resident porter, caretaker) or who provide services solely to the building- or there may be a caretaker or cleaner who works only for the building either on a full or part time basis. 

They are normally employed by either the managing agent or the freeholder directly and often the cost of their employment and their accommodation is met by the service charge. It may be an informal arrangement but that makes no difference and employment law implications could arise regardless.

Inheriting Employees

If the building is transferred to a new owner (as will be the case if the freehold is purchased under the provisions of the leasehold reform housing and Urban Development Act 1993 or the Landlord and Tenant Act 1987), then the employment of any employee will automatically transfer to the new owner of the building in accordance with the provisions of the Transfer of Employment (Protection of Employment) Regulations) 2006 (“Tupe”).

TUPE works to protect employment when employment transfers and TUPE applies automatically on that transfer. TUPE requires that all transferring staff continue to be employed on the same terms and conditions of employment. If you are inheriting an employee under TUPE, therefore, it is important that you know the terms on which they are employed and the cost involved in taking on their employment.

Dismissing an employee to get round the application of TUPE will be risky as any such dismissal is likely to be deemed to be automatically unfair on the basis that it is connected to the transfer.

Taking Advice

Taking advice at an early stage is advised so as to be able to avoid any potential liability later on.

Often the freehold collective will set up a new company and the company will be the employer. They may require specific advice on the basis that the person is likely to be their only employee and often careful liaison with the managing agent is necessary to ensure a smooth transfer of any employment arrangements.

Before the transfer takes places, TUPE requires that a consultation exercise takes place and that certain specific information is provided to the transferring employee.

A failure to inform and consult under TUPE could lead to an employee seeking compensation arising directly out of this failure. 

This consultation period is often combined with strict time limits for completion- particularly under the 1993 Act or where a property is being sold following an offer notice under the provisions of the Landlord and Tenant Act 1987. There is therefore scope for some significant conflict with the required timescales for the TUPE consultation regime with a situation where the flat owners carrying out the enfranchisement need to act promptly to protect their position.

Accordingly, if you are thinking of buying your freehold in a situation where these sorts of issues are likely to arise you should ensure that you instruct an expert practitioner that can deal not only with the purchase of the freehold but also any employment law aspects such as those mentioned above.