Most landlords tend to focus on the financial aspects of property letting. Who could fail to get excited about the opportunity of substantial capital growth involved in property investment and letting, or the thought of stable and long term income streams from rental payments. Yet for all of the planning that goes into the purchasing and managing of a buy to let property, it's easy to overlook some of the potential risks of becoming a landlord. Some of these risks could have severe financial implications, and even jeopardise the entire long-term return on investment. However landlords can feel a bit more comfortable regarding their future, if they have taken out a comprehensive Legal Expenses Insurance policy. This type of policy aims to pay for the financial cost associated with some of the risks of property letting.
Legal expenses policy is normally sold as an additional add-on to the main
buildings and contents policy. It can be easily overlooked by landlords, who
are generally in a hurry to complete their buy to let mortgages, and save as
much money as they can in the
property buying process. However if you are serious about managing your investments, then purchasing this product can provide you with a great deal of peace of mind,
and for a relatively small premium.
Over recent years rights of
tenants have been justifiably enhanced through statutory legislation. As a
result, if a tenants refuse to leave a rented property or pay their rent, then
landlords must go through what ever legal process to recover any monies and/or
evict their tenants. The whole process can take up a lot of the landlords time,
and become very expensive in terms of legal costs. A good Legal Expenses
Insurance policy can go a long way to helping to deal with problems as and when they arise.
Each legal expenses policy will be slightly different from the next, between
insurance companies. So you should always check the policy wording and Key
Facts document to understand the key differences, and how they apply to your
individual insurance needs and requirements. In particular you should check any
policy exclusions, what the policy actually covers, any warranties which may
invalidate the policy if not enforced, as well as any excess levels, before an
insurance claim can be made against the policy.
In general terms legal expenses insurance policies tend to comprise the following features. Firstly defence against prosecution cover relates to situations where the landlord may potentially be in breach of statutory regulations. These may include breaches of the Gas Safety Regulations, Furniture & Furnishings and Electrical Equipment safety Regulations. Your top priority should be to health and safety of your tenants. To this end these regulations compel you to take steps to ensure that the risk fire at gas, do not endanger the health and safety of tenants in anyway. A more common scenario, are situations in which, as a landlord you have no choice but to evict your tenant from the property, (probably due to a serious breach of the assured short hold tenancy agreement). To implement an eviction you will need a solicitor, whose job it would be to advise you on obligatory steps you must follow in order to make any eviction lawful. In this situation your solicitors' charges would be paid for by the legal expenses policy.
Most legal expenses insurance policies provide 24-hour helpline, in order to gain some initial advice from a solicitor over the telephone. This can be an invaluable service in discussing the situation and getting a general indication of the likely next steps. They can provide an initial assessment as to whether your circumstances are likely to lead to some type of court proceedings in the future. As a landlord you have to be extremely careful that you do not take any unlawful or and reasonable steps prior to any court proceedings, which may invalidate any future claim on the policy. This may include such things as issuing legal correspondence yourself, directly to your tenant without first taking legal advice beforehand.
A Legal Expenses Policy also becomes invaluable in situations where you are forced to chase tenants for rent arrears. As more and more tenants struggle to keep their head above water, there has been a general increase in the numbers of tenants failing to keep up with their rent. If the tenant were to leave the property and failed to make payments due to the landlord, policy may assist the landlord in recovery of those monies. The use of a solicitor to facilitate recovery of unpaid rent from the Tenant, will be paid for via a claim against the policy. As each policy differs slightly, don't forget to check to ensure the policy provides as much protection as possible for your insurance needs.