This three-minute read explains the role of rent guarantors.
When a landlord has a niggle of anxiety over whether a prospective tenant will pay their rent, there is a way they can help protect their investment.
A landlord can ask a tenant to provide a guarantor to ‘guarantee the tenancy’.
Guarantors are often family members or close friends – and a little bit like a human safety net.
If the tenant can’t (or won’t) pay what they owe the landlord, the guarantor has to stump up the cash – or face the landlord in court.
Extent of liability
As with so much in the lettings game, it all depends on the terms of the contract.
While some agreements only cover unpaid rent, others will also cover things like damage to the property.
An agreement should clearly state what is covered and outline the circumstances under which the contract will end.
This is important. If the guarantor has a change of heart mid-tenancy, they can’t simply walk away from their commitment. The agreement is legally binding.
When to use a guarantor
It comes down to the landlord’s discretion, but often a guarantor is used when a tenant:
- Is new to renting.
- Has gaps in their employment history or has recently started a new job.
- Is a student.
- Has a credit rating that is lacking in some way. That doesn’t necessarily mean the tenant has had financial problems; they may be young and have never had a credit card or other loans.
- A landlord must check a guarantor’s credit and employment records closely (just as you would with a tenant). Guarantors are often required to own a property and have a gross annual income three times the rent of the rental property they are acting as a guarantor for.
- Most landlords prefer the guarantor to be UK-based as it’s easier to run credit checks on them and take legal action if required.
- Issues can occur when people agree to be the sole guarantor on a rent agreement without realising this makes them liable for all outstanding rent and damage costs. For example, a mother agrees to be a guarantor when her daughter moves in with her boyfriend. However, the couple split, the ex-boyfriend disappears, and Mum is livid that she has to cover his payments.
- Landlords must ensure that a guarantor understands what they’re signing, or they could claim that they were misled or pressured into an agreement.
For more information on any aspect of renting out a property, contact us here at IMS Lettings Solutions.