Do you need legal expenses insurance?

/ Blocks of flats, Freeholders, Leaseholders, News

You’ve obtained an insurance quote for the building and then the list of optional extras comes along.  It can all seem like too many decisions to make when all you want to do is make sure you have met the requirements of the lease and that the fabric of the building is covered.

As a member of a residents’ management company or working with a managing agents, you will know that the workload involved in managing a block can seem almost never ending,  and many of these “extras” are designed to save you time and money down the line.

By negotiating terms for policies developed for blocks of flats, rather than big businesses, we search for competitive rates.  So, if you haven’t already got this cover, do take a closer look.

Legal expenses insurance (LEI) for small businesses (and a residents management company is also a small company) was highlighted in a 2017 insurance industry report*.

It showed that uptake of LEI is relatively low (35% for smallest businesses), yet every firm surveyed expected to have legal issues in the year ahead.

It also revealed that many people think legal expenses insurance is only about defending yourself against action from other people, when in fact it also helps you to pursue your own grievances.

37% of companies surveyed had encountered legal issues related to late payments and, as you will know, service charge income is the life blood of your block.  You may not be able to afford to let arrears mount up.

We’ve also come across a perception that it’s only a helpline. But what a helpline!

You talk  to specialist professionals and can have access to a library of template documents and letters. Imagine the costs of that if you had to visit a high street solicitor.

Taking the right, early action in a dispute can often defuse it, and the helpline can often help you to do just that. You could save hours of time and hassle. If the dispute escalates into a court case, the insurance may pay the legal costs too.

You may have liability cover in place, to cover your directors as individuals, but legal expenses cover is different. It is for the legal entity – the residents’ management company or managing agents.

Ask us about LEI for companies involved in running blocks of flats.

First steps if a contractor or builder lets you down…

Complaints against contractors are the most common form of dispute, the report* says. If building or maintenance work starts to go wrong be sure to:

  • contact the builder or decorator as soon as you know there’s a problem,
  • follow up phone conversations with a letter to confirm the problem, what you agreed the builder should do about it and by when
  • agree a date to complete the work and set a final deadline.
  • make it clear that if they fail to meet the deadline you’ll get someone else to do it and you’ll be claiming back the cost from them
  • the builder or decorator may be busy, but they have breached their contract with you so they should carry out the remedial work as a priority
  • check in with the legal helpline if you haven’t already done so
  • obtain quotes or estimates that you’ve obtained from other builders so your contracted builder can see how much you’ll be claiming if they won’t put the problem right
  • warn the builder that you’ll take them to court if necessary
  • keep good records at all time

Other optional extras to consider

Engineering services: You’ll have to have key equipment  like lifts and boilers and common electrical equipment inspected anyway to stay within the law, so cover that includes statutory inspection and breakdown repair work can make sound sense.

Terrorism: This might not be optional under the terms of your lease. Do check.

Directors & Officers:  As a director or officer of a limited management company, right-to-manage company or residents’ association, you can be held liable for mistakes or oversights in the running of your company or association. D&O liability insurance can protect you from potential personal liability and costs.

 

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The sole purpose of this article is to provide guidance 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 the links which were active at the time 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 Deacon 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.  The links in this article were active at the date of publication but may not remain active.