Dear Amit,
Whether you have raised the query to avoid the problems arising out of overstay of the employee at the company-provided accommodation or you are facing this problem is not understood. However, if you wish to avoid the problem of overstay on cessation of employer-employee relationship or to protect the interest of the employer in case if there is overstay by him or his kith and kin, then you need to obtain application from the employee for the allotment of housing property. On receipt of the application you can issue the letter to the employee in order to intimate the terms and conditions of the occupation and under what circumstances the property needs to be vacated either by him or his kith and kin, in case of the death of the employee.
Nothing wrong to enter into proper legal agreement with the employee. Documentation that is legally valid, obviously helps to protect the interest of the employer.
Thanks,
Dinesh Divekar