The importance of legal expenses cover for landlords

February 2019

Many owners of commercial and residential properties will arrange their buildings insurance but may not see legal expenses as an essential cover, despite the wide-ranging protection that this insurance can offer to landlords.

Legal expenses insurance is flexible and key sections of cover for landlords can include:

Debt Recovery Insurance

Unlike alternative accommodation cover or loss of rent cover (which only apply following a material damage loss), debt recovery coverage within a legal expenses policy acts as a rent recovery facility should your tenant fall into rent arrears. Once rent arrears begin, the legal expenses insurer steps in to pay the fees incurred in recovering rent owed by the tenant to the landlord. This can involve the costs of a debt recovery agent, or the legal fees associated with taking the tenant or guarantor to court to recover the arrears. It’s important to note that the debt must be undisputed for this section of cover to apply - if the debt is disputed, the contract disputes section of cover should be considered.

Contract Disputes Insurance

This section of cover applies to a contractual dispute - which typically must be valued at over £500 - with a party you have a direct contractual relationship with in respect of the purchase, hire, sale or provision of goods/services. This section includes cover for a dispute arising from a breach of a tenancy agreement relating to the use or maintenance of the property, as well as with contractors undertaking works or renovations to the property.

Dilapidations Disputes Insurance

Legal expenses cover is available in respect of a dispute arising from dilapidations to the property, and the dispute must typically be valued in excess of £1,000. This section is often subject to you undertaking a detailed inventory (prior to the tenancy beginning), which notes the condition of all items within the inventory and then a detailed schedule of dilapidations being prepared by you once the tenant has vacated the property.

Eviction cover to regain possession of your property

This legal expenses section can cover the landlord for obtaining possession of the let property, provided that - where appropriate - all statutory and contractual notices have been correctly served to the tenant. This section also includes evicting anyone who is not your legal tenant or ex-tenants who do not have your express permission to be in the let property.

Property Protection

Legal expenses cover can also serve to cover civil disputes relating to physical property owned by you, or for which you are responsible for, following physical damage to the property. This cover extends to defend any allegation of legal nuisance arising from the let property.

Legal Defence Insurance

This covers the costs and expenses to defend your legal rights where it is alleged that you may have committed a criminal offence in connection with your business activities. This includes defence costs in relation to a civil claim against you that seeks compensation under data protection legislation such as the Data Protection Act (DPA) and General Data Protection Regulations (GDPR), as well as legal expenses incurred in defence of a criminal prosecution under the Health and Safety Act.

Tax Protection

Cover can include costs and expenses for a tax or HMRC enquiry, an employer compliance dispute or a VAT dispute arising in connection with your business activities, provided that you have taken reasonable care to ensure that all returns are complete, correct, and submitted within the allowed statutory time limits.

Helplines

Legal expenses policies often give free access to legal and tax advice helplines.

When does a Legal Expenses Policy provide cover?

In civil cases, there must be a reasonable prospect of success for cover to apply. This means that the likelihood that your solicitors will recover losses or damage (or any other legal remedy) or make a successful defence must be at least 51%. In criminal cases, there is no requirement for a prospect of success outcome.

If you would like to find out more about how we can help you and your property to remain comprehensively protected, please contact us here and one of our team will be in touch.