What is a tenancy guarantor?
A tenancy guarantor guarantees rent payments and other tenancy obligations that make up the tenancy agreement. Legally, tenancy guarantors are said to stand surety. Whilst a guarantor must be at least 18, they can come from any walk of life and can have different relationships with a tenant.
Why do I want a guarantor?
When thinking about why you might need a guarantor, it’s easy to think about tenancy guarantors as being like an insurance policy for the landlord. This landlord insurance policy protects the landlord against the tenants defaulting.
Whilst the guarantor pays the landlord the rent if the tenant defaults, guarantors would also have to cover the costs and losses, expenses or damages, experienced by a landlord should the tenant fail to cover the costs.
Do I need a guarantor?
It often surprises landlords how often a guarantor is required. At MakeUrMove we advise landlords to err on the side of caution and get a guarantor if there is any doubt. Generally we will suggest a guarantor may be required if a tenant has a low credit score or if they are a more high-risk tenant, such as a student, DSS tenant or if they have a low income.
As a landlord, you are providing people with a home but you’ve always got to understand that it's tough for many people to make ends meet. Tenants often have very limited disposable income and you should consider all tenants a potential risk.
A tenancy guarantor’s role is, therefore, to agree to meet all the obligations and clauses within a tenancy agreement on behalf of the tenant.
There are a number of different things that could be included in the obligations a tenancy guarantor may be expected to cover. These include rent arrears, damage caused by the tenants to the property and any expenses incurred by the landlord, through the tenant's failure to comply with the covenants of their tenancy agreement.
All the legal liabilities of the tenant are taken on by the tenant and the guarantor enters into a contract to ensure they are bound to comply, meaning if they don’t meet at any point meet the liabilities of the tenant they can be sued for non-compliance.
Unfortunately, as times have become much tougher for everyone in recent years, legal claims against guarantors have also been on the increase. As such, potential guarantors are increasingly taking time to consider whether or not they should put their name forward as a tenancy guarantor. As a landlord, you should be clear in your mind that a guarantor hasn’t entered into an agreement too quickly and without proper consideration.
When looking at the suitability of guarantors, we look at a potential guarantor’s income and credit history whilst many referencing agencies also require guarantors to be home-owners and be in longer-term, full-time employment.
As a guarantor has a vested interest in your property, they can often provide a useful second contact should you have any problems with your tenant or should the tenant become uncommunicative.
The decision whether or not to include a tenancy guarantor is entirely yours. You can still accept an offer from a tenant who we believe requires a guarantor however you may have difficulty securing insurance products such as rent guarantee, and it may affect your mortgage if you are required to prove due diligence in the future.
Who can be a guarantor?
Whilst anyone over the age of 18 can be a tenancy guarantor, perhaps the most common type of guarantor/tenant relationship is that or parent and child relationship. Many landlords consider the parent of a tenant to be the best form of guarantor as they understand their child’s abilities to cover the cost of the rent and will be able to take a view on how much hey can trust their child to look after a property. Additionally, should there be any, a parent may be more likely to cover the costs of their child than a stranger may be.
Parents of students who are prepared to act as guarantors need to be made aware of the potential pitfalls in this situation, especially when joint residential tenancies can carry joint and several liabilities. This means that one guarantor could essentially be the guarantor for all the resident tenants and not just that of the tenant they were prepared to be a guarantor for.
Can I have more than one guarantor?
In the same way that you can have multiple tenants on a tenancy agreement, you can also have multiple guarantors. In fact, it is desirable to try to get more than one guarantor as this means you have more people who are responsible for ensuring the costs are covered.
What checks are carried out for a tenancy guarantor?
Applications for tenancy guarantors are very similar in nature to the referencing of a tenant prior to arranging a tenancy. In this process the following areas will be checked:
- Any adverse credit history such as bankruptcy, CCJs and court decrees
- Previous names and addresses which haven’t been disclosed
- Undisclosed credit history which is linked to their current and most recent homes
- Banking details provided are for a genuine bank account
- Employment history
What documentation do I need for the guarantor?
The guarantor agreement or clauses within the tenancy is just as important as the tenancy agreement itself. In order to uphold the agreement, a court would scrutinize the wording of the agreement and make a determination off the back of it.
Although you can have a separate guarantor agreement, it is always advisable to incorporate the guarantor clauses within the tenancy agreement. By incorporating the guarantor clauses into the tenancy agreement it may be clearer to the guarantor that they are responsible for all the obligations in the tenancy agreement. It’s always worth getting the tenancy guarantor to initial or sign each page of the tenancy document.
It’s essential that the tenancy guarantor should also be witnessed in order to make the agreement an obligated deed. This also means that the tenancy guarantor cannot deny that the signature is their own.
A landlord needs to determine if they are prepared to let the guarantor guarantee the original lease term or if they wish the guarantor to continue into the subsequent tenancy period.
Examples of tenancy guarantor clauses in a tenancy agreement
If the fixed term lapses does the guarantor still have to cover costs?
The agreement or clauses should state is a guarantor is going to be a primary obligator or if they will indemnify the landlord against loss. As a primary obligator, a guarantor would only be obliged to pay for a tenancy until the end of a stated period, whereas, should the guarantor agree to indemnify the landlord against loss, the guarantor will be obliged to cover any cost unless released from the contract in writing by the landlord. As standard, we don’t advise landlords to use primary obligator guarantors within their contract.
What do I need to consider when I have a tenancy guarantor?
One of the most crucial things to remember is you need to continue to communicate with landlords if a problem occurs with the tenancy. If you don’t keep the guarantor informed of issues that have arisen, and it does go to court, the judge will not look favourably on your case and may side with the guarantor. In addition to keeping a guarantor informed, it’s important to keep any correspondence or contact with the guarantor logged.
Find the best tenants with MakeUrMove
To get started, list your rental property with MakeUrMove and we’ll carry out all the tenancy referencing and help arrange a guarantor if required.