The landlord’s lifeline: Legal and rent protection in the age of the Renters’ Rights Bill
As a landlord, safeguarding your investment extends beyond property maintenance; it encompasses protecting your rental income and shielding yourself against potential legal disputes. There are several ways in which you can reduce your risks, such as carrying out thorough tenant referencing and periodic inspections, having clear communication with tenants, and using a guarantor.
But however careful you are it’s not possible to eliminate risks entirely. If you are a landlord letting out a property, you always run the risk of your tenant defaulting on the rent - you can’t possibly predict them falling ill or losing their job and being unable to pay. You may be able to tolerate this risk, but if you rely on your rental income to cover your mortgage or other significant costs, legal expenses and rent protection insurance (also known as rent guarantee insurance).can provide financial protection, giving you peace of mind and a safety net if a tenant falls behind on payments or you face legal action and court proceedings. This could include scenarios such as needing to evict your tenant, if a tenant has damaged your property, or if you need to recover rent arrears from your tenant.
Landlords are not required to have either legal expenses or rent protection insurance by law, but changes to the law proposed under the Renters’ Rights Bill will make these optional covers more necessary than they were previously for most landlords.
In this guide, NRLA insurance partner, Total Landlord, explains why the Renters’ Rights Bill increases the need for legal expenses and rent protection insurance, the benefits of securing cover, and other best practices you can adopt to reduce your risks once the Bill becomes law.
Why does the Renters’ Rights Bill increase the need for legal expenses and rent protection insurance?
The Renters' Rights Bill, which is likely to become law in spring / summer 2025, is set to introduce major changes to the UK rental market, strengthening tenant protections and reshaping the way landlords manage their properties. One of the most significant reforms is the abolition of Section 21 "no-fault" evictions, which will make it more challenging for landlords to regain possession of their properties.
Under the new legislation, landlords will no longer be able to use Section 21 to evict tenants at two months’ notice (after the first six months of the tenancy and once any initial fixed period has expired) without providing a legally valid reason. Instead, they will need to rely on Section 8, which requires them to prove specific grounds for eviction, such as rent arrears or breach of tenancy terms. Currently, notice can be served if a tenant is at least two months in arrears, with a notice period of two weeks. Under the proposals in the Bill, the tenant will need to be three months in arrears and the notice period will increase from two to four weeks. This means that the landlord will not have received rental income for three months by the time they are able to serve a Section 8. You can find out more about the implications of changes to evictions for rent arrears in Total Landlord’s article, ‘Renters’ Rights Bill: What’s happening to evictions and Section 21?’.
While the changes aim to enhance tenant security, landlords are likely to face a longer and more complex process involving the courts when dealing with problematic tenancies. This increased difficulty in securing possession of a property should anything go wrong during the tenancy will make financial protection more crucial than ever for most landlords.
Paul Shamplina, founder of NRLA legal services partner Landlord Action, who specialise in helping landlords with problem tenants, emphasises the importance of having comprehensive protection.
When landlords are faced with eviction proceedings the process can be both financially draining and emotionally stressful. With the removal of Section 21, landlords will need to navigate a more rigorous legal process under Section 8, which will be more time-consuming and costly. Legal expenses insurance serves as a crucial safety net, covering the substantial costs of legal proceedings, court fees, and professional representation, making sure that landlords can take necessary action without the burden of unexpected expenses. Coupled with rent protection insurance, which provides essential income protection when tenants default, these policies are more important than ever. In an evolving rental market where landlords face greater legal hurdles, having this level of protection is not just advisable—it’s essential for financial security and peace of mind.
The growing importance of legal expenses and rent protection insurance
Once the Renters’ Rights Bill becomes an Act, rent protection insurance will serve as a vital safety net for landlords by making sure that they receive rent payments when a tenant defaults, helping to maintain their cash flow. In cases where eviction is necessary, legal expenses insurance will cover legal costs, including serving notices and handling court proceedings—saving time, stress and money.
Additionally, with legal expenses and rent protection insurance in place, landlords are likely to feel more confident in renting to a more diverse range of tenants, for example tenants on Universal Credit and housing benefit. The Bill will make it illegal for landlords to discriminate against these tenants, so this could help discourage any landlords who are tempted to do so, protecting landlords from potential penalties and contributing to fairer access to the rental market for vulnerable tenants.
Understanding legal expenses and rent protection insurance
For most landlords, particularly if you have a mortgage on your rental property, it’s worth considering adding legal expenses and rent protection to your landlord insurance policy for the protection and peace of mind it will bring during a turbulent time for both the sector and the economy. But as with any insurance product, it’s important to understand the cover in more detail when deciding if it meets your needs.
Legal expenses insurance covers the costs associated with legal disputes related to your rental property. This includes issues such as tenant evictions, property damage claims, and other tenancy-related conflicts. Total Landlord’s legal expenses insurance covers up to £100,000 for legal expenses for eviction, property disputes, or damage claims, as well as access to 24/7 legal advice for any property-related issues and legal costs to mediate disputes.
Rent protection insurance makes sure that you continue to receive rental income if a tenant defaults on payments. For instance, Total Landlord's rent protection insurance covers missed rent payments up to £2,500 per month for up to six months, providing financial stability during tenant arrears.
Steve Barnes, Head of Broking at Total Landlord, says:
At Total Landlord we are committed to providing comprehensive cover that addresses the evolving needs of landlords. Total Landlord's legal expenses and rent protection products are available as an ‘add on’ to our buildings and contents insurance policy, offering robust protection against potential financial losses arising from tenant disputes and unpaid rent, so that landlords can manage their properties with greater confidence and security.
Incorporating legal expenses and rent protection insurance into your landlord policy offers several benefits:
- Financial security: Rent protection insurance provides rental income for a specified time period such as six months, even if a tenant defaults
- Legal support: Legal expenses insurance covers costs related to tenant disputes, evictions, and property damage claims, as well as legal advice when needed
- Peace of mind: Legal expenses and rent protection insurance support landlords to manage their properties confidently, in the knowledge that they are protected against common risks
Implementing best practices:
As well as securing appropriate landlord insurance, the following best practices will become even more important once the Renters’ Rights Bill becomes law, to minimise risks:
1. Thorough tenant referencing:
Carrying out comprehensive background checks helps to assess tenant reliability and reduces the risks of rent arrears, property damage, and legal disputes. A robust reference check is also usually required for landlord insurance claims.
What should tenant referencing include?
At Total Landlord we recommend a minimum of a four-point reference check:
- Proof of identity – The tenant must provide two forms of photographic identification, such as a driving licence or passport, to verify their identity.
- Proof of address – The tenant should submit a recent utility bill, council tax bill, or bank statement (issued within the last two months) to confirm their current residence.
- Credit check – With the tenant’s consent, conduct a credit check through agencies like Experian or Equifax to assess their financial history. This will reveal any outstanding debts, County Court Judgments (CCJs), or bankruptcy orders.
- Employment verification – Obtain a written reference from the tenant’s employer confirming their current and permanent job status, along with their salary. Ideally, rent should not exceed 30% of their income.
Be aware of any tenant referencing ‘red flags’, which can include:
- Offering to pay large sums upfront
- Refusing inspections or keeping bills in the landlord's name
- Rushing the move-in process
- Being reluctant to provide necessary information
These could indicate fraudulent activity or criminal intent (e.g., cannabis farms, money laundering) and if something doesn’t feel right, don’t go ahead with the tenancy. While robust tenant referencing is essential, it is no substitute for comprehensive landlord insurance, which is a must for risk management.
For more comprehensive guidance, read Total Landlord’s NRLA guide to tenant referencing.
2. Using a guarantor
If you have any reservations about a tenant, particularly if you are concerned that they may not be able to pay the rent, consider using a guarantor. A guarantor will guarantee rent payments if the tenant falls into arrears or defaults on the tenancy agreement.
The use of guarantors is becoming more commonplace and is likely to increase when the Renters’ Rights Bill becomes law and it becomes more difficult to get rid of tenants who are unable to pay the rent. Future guarantor agreements will also need to be drafted to take into account that all tenancies will become periodic once the Bill comes into effect, as this will mean that the guarantor will be continuously liable. Here are some circumstances where it is already commonplace to insist on a guarantor:
- Tenant has not worked for their current employer for longer than six months
- Tenant is below the age of 21
- Tenant has a low or non-existent credit score
- Tenant has not lived at the present address for more than six months
- Tenant has lived abroad with no UK credit history
- Tenant is a student
- Tenant has an income below the affordability line – typically the rent would be no more than one-third of income
Read Total Landlord’s guide, ‘What is a guarantor and who can be one?’ for more information on this topic, including the impact of the Renters’ Rights Bill on guarantors.
3. Regular property inspections
When the Renters’ Rights Bill comes into effect it will be more important than ever to schedule regular periodic inspections so that you can identify and address potential issues promptly. The Bill will introduce a Decent Homes Standard and Awaab’s Law to the private rented sector, and landlords will need to address hazards such as damp and mould within a specific time frame or risk severe penalties. Inspections are also an opportunity to increase communication with tenants and can be beneficial to the landlord tenant relationship, as well as being a requirement of most landlord insurance policies. For more information on what you should inspect and what to do if a tenant refuses entry, read Total Landlord’s ultimate guide to inspecting your property.
In the rapidly evolving rental market with significant legislative change expected this year, it’s important to be prepared for any challenges that may arise. By combining these practices with robust landlord insurance cover, including legal expenses and rent protection insurance, landlords will be doing all they can to reduce risks and protect their investment during these times of change in the sector.
Find out more about Total Landlord’s legal expenses and rent protection insurance and for a competitive quote and to discuss your insurance needs please call 0203 907 1779.
