Landlord insurance may cover your legal costs and other expenses involved with evicting a tenant from your property.
So, you're thinking about renting out your property and becoming a landlord?
It’s not as simple as just handing over the keys, sitting back and watching the money roll in.
The reality of evicting an unexpectedly difficult tenant might take the lord out of your landlording unless you protect your interests with landlord insurance.
Research by the National Landlords Association claims that the average landlord spent £14,500 on property maintenance and running costs last year - and is currently owed £1,751 in missed rental payments.
Not to mention the stress and costs incurred by evicting troublesome tenants, with the latest Ministry of Justice statistics recording 32,077 landlord possession claims, 25,195 orders for possession and 16,018 warrants of possession for April to June, 2017, alone.
It's a stern lesson for landlords - putting off landlord legal protection in favour of reducing the costs of renting out their property, is storing up trouble for the future.
Chris Norris, Head of Policy, Public Affairs and Research at the National Landlords Association says: "It's essential that landlords take out specialist insurance, as typical household policies will not provide the level of cover required for buy-to-let properties, particularly when it comes to troublesome tenants.
"Specialist landlord insurance will not only cover properties against accidental damage, but will also protect against vandalism and loss of rental income by non-payment of rent or periods of un-occupancy.
“The more comprehensive policies can also cover legal expenses and bringing tenancies to an end."
The most common reason for evicting tenants is rent arrears.
You can issue a section 21 notice if your tenant has an assured shorthold tenancy (AST) and you need the property back at the end of the fixed term.
Specialist landlord insurance will not only cover properties against accidental damage, but will also protect against vandalism and loss of rental income by non-payment of rent or periods of un-occupancy
However, if the tenant has broken the terms of the tenancy, you can issue a section 8 notice which gives them between two weeks and two months’ notice to vacate.
Legally, a tenant must be two months in arrears before proceedings can commence.
The process of going to court can then take up to a further three months.
This can mean that a landlord can be without any rent for a whopping six months before possession is granted.
Landlords will also accrue legal fees which, although costs may be awarded at the hearing together with any rent arrears, are very difficult to get back from a tenant who has little or no money.
If you don’t have a written tenancy agreement, it will still be classed as an AST if:
Occasionally, although possession is granted, a tenant may refuse to leave.
This entails another court hearing in order to instruct bailiffs (hence the rent is paid until vacant possession).
You can pursue accelerated possession procedure which allows you to evict the tenant and skip court processes, but there's a cost to it - in 2017 the fee was £355.
Read the terms and conditions of your landlord insurance policy to see if you can claim for accelerated procedure costs.
Given the strain that legal costs can place on a landlord's business, it's important they take the time to research the policies available so as to ensure adequate protection from potential losses.
Not all policies will have the same level of legal protection and, as when making any important purchase, landlords need to watch out for the small print and make sure they are fully covered.
Landlords should also ensure they are aware of any excesses which apply to the policy, the maximum payable on any single claim and any time limits (ie. up to 12 months from the start of the claim).
Estate agents who ensure their landlords are aware of the risks before letting out their property often end up frustrated when landlords later blame their vetting procedures if things go awry.
Rachel Andrews, Managing Director of Olivia Louise Estate Agent, says: "We always advise landlords to take out some form of protection, particularly rent and legal protection insurance, and especially those landlords who have mortgages on the property.†
“They are entrusting their largest asset to us and even with the best referencing process sometimes the tenancy goes wrong.
“Unfortunately, however thorough we are in vetting prospective tenants, even the most exemplary individual may be unable to pay the rent, perhaps due to unemployment, illness or marital break-up.
“But only approximately 30% of our landlords decide to take out landlord insurance.
"All good agents should point out the pitfalls of renting.
“Landlords should always be advised of their rights, particularly regarding getting possession.
“The Housing Act was designed to allow landlords to gain possession through the courts and the process is designed to assist this process.
“However, the rules are quite strict and any slip-ups can result in a claim for possession being rejected, meaning a further delay and extra costs to the landlord."
The main issue with trying to evict a tenant is the loss of rent, the legal costs, which can be anywhere upwards of £3,000 and the time it takes to get to court.
The Housing Act was designed to allow landlords to gain possession through the courts and the process is designed to assist this process
Remember, you have to follow procedure otherwise you could be accused of harrassing the tenant, or evicting them ilegally.
The landlord has to instruct the agent (if using one) to serve the appropriate notices - this would normally be in the form of a Section 8 Notice, accompanied by a Section 21.
Once the notices have expired and an application is made to the court, it will be down to the landlord to produce the evidence such as the tenancy agreement, a statement of account to prove the arrears, appoint a solicitor, attend court, and hope for the best.
You can compare landlord insurance policies with GoCompare - it's a policy worth having, as it can help give you the peace of mind of a trouble-free tenancy, allowing you to continue reaping the rewards of renting even when things go wrong.
A good policy should:
Once the appropriate notices are served on the tenant you can put in a claim with the insurer.
The provider will then start the process, obtaining evidence from the agent, instructing solicitors and, if appropriate, a barrister, then they'll apply to the courts for a possession hearing.
Most insurers will continue to pay the rent until vacant possession is obtained.