The Importance of Legal Expenses for Landlords

August 2021

Many property owners of commercial and residential properties arrange their buildings insurance, however legal expenses is not always seen as an essential cover, despite the wide range of protections legal expenses insurance offers to landlords. 

Legal expenses insurances vary hugely from provider to provider, so it is always important to check what covers are actually being provided (often requires you to refer to the full Policy Wording). At Daines Kapp we believe a comprehensive legal expenses policy would provide the following key sections of cover for landlords;

Debt Recovery Insurance

Unlike alternative accommodation cover or loss of rent cover which only apply following a material damage loss, the debt recovery section under a legal expenses Policy functions as a rent recovery facility whenever the tenant falls in to rent arears. Once the tenant falls in to rent arears, 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 in taking the tenant or guarantor to court to recover the arears. The debt must be undisputed for this section of cover to apply. If the debit is disputed, the Contract Disputes section of cover should be considered.

Contract Disputes Insurance

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

Dilapidations Disputes Insurance

Legal expenses cover is available in respect of a dispute relating to dilapidations to the let property. The dispute must typically be valued in excess of £1,000. This section in often subject to prior to the tenancy beginning, a detailed inventory, which notes the condition of all items on the inventory, having been drawn up by you, and after the tenant has vacated, a detailed Schedule of Dilapidations having been prepared by you.

Eviction cover to regain possession of your property

A legal expenses policy can cover the landlord for obtaining possession of the let property provided that, where appropriate, all statutory and contractual notices have been correctly served by you on the tenant. This section extends to evict anyone who is not your tenant or ex-tenant from the let property and who has not got your permission to be there.

Property Protection

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

Legal Defence Insurance

A legal expenses Policy covers 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). The legal defence costs includes defence costs in relation to a civil claim against you seeking 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 and correct and are submitted within the statutory time limits allowed.

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 the prospects that your solicitors will recover losses or damages (or any other legal remedy) or make a successful defence, must be at least 51%. In criminal cases there is no requirement for there to be prospects of a successful outcome.