What happens to caretakers, maintenance engineers and cleaners when a leasehold/freehold property is sold? New case law guidance on this issue is not as helpful as it first appears.
The TUPE headache
Most property investors are already aware that a piece of legislation commonly referred to as TUPE (Transfer of Undertakings (employee rights)) interferes with deals done to sell leasehold/freehold property. Generally, TUPE is relevant where UK staff are dedicated to that property or where they wholly or mainly provide services to that property. The TUPE rules stipulate that:
This affects caretakers, maintenance engineers and cleaners because they are often dedicated to a property or employed by a company that contracts with the property-owner to provide these services (a “service provider” company). In turn, TUPE tends to dictate that the employees should “follow the work” when there is a change of service provider or where similar services are going to be carried out for a new owner of the property.
All this can make things awkward for parties to a sale. The Buyer often doesn’t want to deal with the implications of these obligations or assume liabilities when doing the deal. Indeed the Buyer may well want to contract with a different service-provider company upon acquiring the property. However, if the parties ignore TUPE obligations, they can be sued by the employees concerned.
Lawyers make a living out of solving the practical issues which arise from these obligations. However, new case law suggests that the problem may not arise in certain circumstances.
Problem solved, given the right scenario?
New case law suggests that in deals where the identity of the property-owner changes at the same time that there is a change in the provider of caretakers, engineers and cleaners then TUPE doesn’t apply. However, when you examine the judgment, it’s not quite as simple as that.
As such, it’s still going to be worth contacting a lawyer to check if it’s worth assuming that TUPE doesn’t apply to the sale of purchase of the property.
Regardless of the above, it is still the case that where a property-owner outsources caretaking, maintenance and cleaning functions, TUPE may apply and lawyers should be consulted. The same is true where a property-owner chooses to cease such an arrangement and carry out those services in-house.
Practical issues remaining