In what scenarios might a landlord need Legal Expenses and Rent Guarantee Insurance?
Tenants can default on rent for many reasons, leaving landlords to cover the costs. This can lead to considerable financial strain and put investments at risk.
There are several scenarios where landlords may benefit from Legal Expenses and Rent Guarantee Insurance. Here we look at some of those.
The following information is for guidance purposes only and is not a substitute for policy documentation, which you should read carefully and in full. Cover is subject to the full terms, conditions, limits and exclusions of Rentguard’s Landlord Rent Guarantee Protection Insurance policy wording.
When might a landlord need Legal Expenses and Rent Guarantee Insurance protection?
With a range of bills and potentially a mortgage to pay, we may be able to help landlords in certain circumstances.
Scenarios in which a landlord might need Legal Expenses and Rent Guarantee Insurance protection include:
- A tenant in rent arrears
- Eviction of tenants and repossession of the property required as a result of rent arrears
- Accessing legal advice
When a tenant is in rent arrears
If your tenant is in arrears, this can have a knock-on effect on the rest of your business as a landlord, especially if you have a mortgage to pay. Rent Guarantee Insurance can offer landlords financial protection for missed rent payments for a set period.
A report published by Citizens Advice in March 2022 estimated that 425,000 UK renters were in arrears, owing on average £937 each.[1] With the cost of living crisis impacting many tenants’ finances, this only stresses the importance of landlords being prepared for rent default situations.
As an example, you may have performed all the necessary referencing checks, and your tenants may have been paying their rent on time for a number of years. However, once they hit financial difficulties, the issue can snowball until they can no longer afford to pay rent. They may be made redundant from their job or have to leave employment due to an illness. Such situations can leave people without financial stability for some time.
Suitable rent guarantee insurance can provide access to a safety net that may ease the burden and help landlords keep up with mortgage repayments.
Evicting tenants and repossessing the property
Should you find yourself in a situation where you need to pursue legal action, our cover can help to offset costs. For example, if you need to recover possession of the property due to a tenant failing to perform tenancy agreement obligations relating to the rightful occupation of the property.
Legal Expenses and Rent Guarantee Insurance can help with the financial burden, should you face an eviction situation.
When accessing legal advice
Our product can also provide cover for the costs incurred by mediation with tenants. This includes if your tenant breaches the tenancy agreement in relation to the rightful occupation of the property. Our cover is there to help with advisers’ costs associated with pursuing legal actions.
Seeking legal advice can be beneficial, as landlords need to follow the correct eviction procedures.
Tenant referencing is a requirement of this policy
Tenant referencing checks must be completed successfully and adhere to the terms laid out in the policy wording, as a requirement of the policy.
A successful full profile referencing check through the NRLA’s referencing service is currently acceptable referencing for our Legal Expenses and Rent Guarantee policy.
Any claims may be unsuccessful if you fail to provide evidence that you successfully completed a tenant reference before the start of the tenancy agreement. We also cannot provide cover if the tenancy agreement started more than 31 days after the tenant reference.
For information about what tenant referencing involves, view the NRLA’s Tenant Referencing page.
As well as a requirement for our Legal Expenses and Rent Guarantee insurance, referencing can help provide reassurance that you have found a suitable tenant for your property.
Peace of mind for landlords
While many tenants pay their rent on time and will treat your property with respect, there is always a risk of challenging tenants. It is also worth bearing in mind that a tenant’s personal and financial situation can change.
Financial protection for your investment can help to allay concerns about potential future issues that may affect the time and money you have invested into your property.
[1] https://www.citizensadvice.org.uk/Global/CitizensAdvice/Housing%20Publications/Renters%20and%20cost%20of%20living%20output%20.pdf
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Get a quote online or speak to our specialist team on 0333 000 0169.
The sole purpose of this article is to provide information on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited trading as Rentguard and National Residential Landlords Association, an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.
National Residential Landlords Association is an Introducer Appointed Representative of Arthur J. Gallagher Insurance Brokers Limited, which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building, 7th Floor, 55 Blythswood Street, Glasgow, G2 7AT. Registered in Scotland. Company Number: SC108909. Rentguard is a trading name of Arthur J. Gallagher Insurance Brokers Limited.
