All you need to know about landlord legal expenses cover
Landlord legal expenses cover is a smart choice for anyone who owns buy-to-let properties. In an ideal world, renting out houses and apartments goes smoothly. But the reality is that things can go wrong. You may need to evict tenants who refuse to leave or pursue them for unpaid rent. You could need to take a tenant to court for damaging your property. Or you may even find yourself the subject of an HMRC tax investigation. In these and other circumstances, legal fees can quickly rack up. Landlord legal expenses cover is designed to meet these costs when needed, preventing your finances from taking an unexpected hit.
- What is landlord legal expenses cover?
- Do I have to have legal expenses cover?
- What’s included with legal cover?
- What does landlord legal expenses not cover?
- Will landlord legal expenses cover my landlord legal requirements?
- How much is landlord legal expenses cover?
- Is ‘landlord legal expenses’ the same as ‘legal cover’?
- How do I buy landlord legal expenses cover?
What is landlord legal expenses cover?
Essentially, landlord legal expenses cover is an insurance policy that pays out if you have unforeseen legal expenses relating to your tenant and/or property (which are within the scope of the policy conditions). You can buy it as a standalone policy or in combination with other cover, particularly rent insurance.
Do I have to have legal expenses cover?
No, there’s no legal requirement to have this cover. However, given the current economic climate, it’s a smart choice for landlords. Between October and December 2022, landlord possession claims increased from 14,436 to 20,460 (42%) compared to the same period in 2021. Actual repossessions shot up from 2,729 to 5,409, an increase of 98%.
Many of these landlords will have faced significant legal bills to reclaim their homes (not to mention loss of rent). Only those with valid landlord legal expenses cover wouldn’t have had to dig deep into their own pockets.
From August 2023, the Housing Loss Prevention Advice Service (HLPAS) gives tenants access to free legal advice and representation in court if they are at risk of losing their home. Landlord legal expenses insurance also gives landlords access to legal advice and representation.
What’s included with legal cover?
What landlord legal expenses cover includes depends on your policy. As a guide, landlord legal expenses from Alan Boswell Group includes access to a 24/7 legal advice helpline, along with the following six types of cover:
Eviction cover
If you have problems with tenants and need to evict them, they won’t always willingly leave your property. Indeed, some local authorities will advise private tenants to stay in your property when facing eviction, which can lead to complications and legal costs. Legal expenses cover will pay for the legal fees associated with evicting tenants under the Housing Act 1988 and will even cover the cost of issuing Section 21 and Section 8 notices.
General property disputes cover
This covers you for a range of disputes concerning your property. For example, if a tenant causes expensive damage to your property or there’s damage due to nuisance or trespass, your legal fees will be covered as you pursue a claim. ‘Nuisance’ covers things like noise, smell or damp coming from adjoining properties. Similarly, if you need to take a tenant to court for breaching the terms of their tenancy, this cover will normally kick in.
As an aside, having a full property inventory and conducting regular property inspections is always a good idea. The former will minimise disputes about damage to the property’s contents, while the latter will allow you to spot any damage to the property itself quickly.
Repair and renovations disputes
This cover is for when you enter into a contractual dispute with a third party over your property’s repair, refurbishment or renovation. For example, if you hired a company to repair the roof and they failed to do the job properly – or made it worse – your legal fees should be covered if you sued them.
Health and safety prosecutions
This would cover your legal expenses if you were prosecuted under the Health & Safety Act. Renters can now apply directly to a court for compensation if they believe the property isn’t safe to live in, so these claims will likely rise.
Rent recovery
Even if you evict a tenant, they may leave owing you a significant amount of rent. Rent recovery cover pays for your legal fees if you take the tenant to court.
Tax investigation cover
This is a valuable part of landlord legal expenses cover. If the taxman decided to investigate your tax affairs and took you to court, this part of the policy would cover your legal representation. If you have an accountant, it’s worth asking them if they offer a fee protection service. This would cover their fees if they had to respond to extensive HMRC enquiries during the investigation, reducing the need for separate legal expenses cover.
What does landlord legal expenses not cover?
While landlord legal expenses cover can be invaluable in many situations, it’s important to be aware that your policy will have certain restrictions and exclusions. Some of the most common are listed below.
Claims below a certain value
Most legal expenses policies will set a minimum value for any dispute, often in the region of £1,000. So, if you decide to sue a tenant for causing damage worth £500, you wouldn’t be covered for your legal expenses. Similarly, policies usually set a minimum rent arrears level before they will cover your eviction costs, generally about £250 or more.
Reasonable chance of success
Legal policies rely on something called ‘reasonable chance of success’. This means that you’ll be covered if your claim is deemed to have over a 50% chance of succeeding. The idea is to prevent policyholders from pursuing claims that are likely to fail. An example might be when a landlord takes the tenant to court for unpaid rent, but there is evidence that the landlord hasn’t responded to maintenance issues. It’s likely that the case would be dismissed in court and could also be deemed a revenge eviction.
Late claims
If you think you need to make a claim using your landlord legal expenses cover, it’s important to tell your insurer as soon as possible. If you don’t inform them about the insured incident within a certain period – often in the region of 90 days – your claim will probably be refused.
Multiple properties
While policies will cover multiple tenants at the same property, you need a separate policy for each tenancy agreement. In other words, you can’t use the cover for one rental property to cover you for another.
Non-residential properties
Landlord legal expenses cover is for residential properties only. If you own commercial property, you’ll need specialist commercial property insurance that includes legal cover.
Other exclusions
Always check the small print before signing on the dotted line. Different policies have different exclusions, although most won’t cover legal expenses if you sue for damage caused by subsidence, mining, or quarrying.
Will landlord legal expenses cover my landlord legal requirements?
It’s important to remember that a landlord legal expenses policy will not cover you if you fail to meet your legal landlord responsibilities. For example, if a tenant was electrocuted by a faulty socket and you didn’t have a current Electrical Installation Condition Report, your legal cover would be invalid if the tenant took you to court. Similarly, if you make regular, unannounced visits to the property, this would almost certainly constitute landlord harassment. If you were sued, your legal expenses cover wouldn’t be valid – the ‘chance of success’ would be minimal. So, while legal cover is very useful, keeping on top of your legal responsibilities to your tenants is essential.
How much is landlord legal expenses cover?
The cost of landlord legal expenses cover varies from insurer to insurer. At Alan Boswell Group, it costs £60 annually if you take it out with your landlord insurance or £80 as a standalone policy. Alternatively, you can add rent guarantee insurance and legal cover to your landlord policy for £195 per year.
Is ‘landlord legal expenses’ the same as ‘legal cover’?
Yes, landlord legal expenses cover is the same as legal cover. However, these policies only cover legal costs associated with your buy-to-let properties. You can also buy separate cover for commercial, motor and home / family legal expenses.
How do I buy landlord legal expenses cover?
How you buy cover will depend on your insurer. At Alan Boswell Group, you can buy landlord legal expenses cover via the following links:
- Standalone landlord legal expenses cover
- As an add-on to your landlord building insurance
- In a bundle with rent guarantee insurance
No matter how you choose to buy landlord legal expenses cover it’s a smart move, especially when growing numbers of tenants are being evicted. To find out more, call 01603 216399 to speak to our specialist team.
