A significant hindrance to your property business can be sourcing new and reliable tenants. It is advisable to obtain guarantors in specific instances to protect your income and mitigate this risk. Read this article to find out everything you need to know about tenancy guarantors.
Who qualifies as a guarantor?
A guarantor is usually the tenant's friend or close relative. There are no strict criteria set out in legislation which define who can be a guarantor. The requirements will differ from one letting agent or landlord to another. There are, however, standard criteria requested by most landlords and agents as the bare minimum.
The main requirement is for the guarantor to be UK based. If the tenant fails to pay rent, the landlords can have peace of mind knowing the guarantor will guarantee the rent. In the unlikely event that tenants and guarantors fail to pay, you can seek legal action. Having a UK-based guarantor makes seeking legal action more straightforward, which is why this is the basic requirement.
Other requirements that assess the guarantor's financial health include salary, homeownership and satisfactory credit checks.
What is the role of a guarantor?
The guarantor guarantees to pay any rent arrears if the tenant has failed to pay rent or any damages in or to the property costing more than the deposit.
Do guarantors get credit checked?
A credit check is often used by institutions to check an individual's financial history. Letting agents or landlords often conduct a soft credit check on a guarantor to assess your ability to pay and the general financial situation. A credit check will show if a guarantor has had any CCJs or if they have been keeping up with payments and many other factors.
When do you require a guarantor?
A guarantor will most likely be required if the tenant is:
- a student
- an international student
- doesn't earn the required minimum to rent the property
- has no credit or failed the credit check
This, again, can differ from agency to agency, but if you have a tenant who is not a full-time working adult, it might be best to secure yourself with a guarantor.
What to do if a tenant doesn’t have a guarantor?
It is familiar for most international students, for example, not to have a UK guarantor. In this case, the landlord or letting agent may provide you with two options. One would be to pay the rent upfront, and the second is to go via a rent guarantor service. If the tenants proceed with the latter, they will have to pay a small fee for the service.
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Can a guarantor be rejected?
A guarantor may be rejected or asked for further documentation in circumstances where the guarantor is:
- not a homeowner
- does not live in the country
- has a bad credit history
Can a guarantor be a family member?
Yes, anyone can be a guarantor, friend or relative.
How much does a guarantor have to earn?
Most letting agents will require guarantors to earn three times the total annual rent. This ensures the guarantor can cover the missed rent payments and their financial obligations.
What happens if the guarantor doesn't pay?
If the guarantor fails to pay, the landlord or letting agent has the right to take the guarantor to court, provided they have a guarantor agreement in place.
What documents are required from a guarantor?
If you are taking on tenants who require a guarantor, it is essential to collect the necessary documents from them to verify their ID and address and ensure they fit the criteria you decided on.
Some documents you can request include the following:
- Proof of ID (passport or driving licence)
- Bank statement
- Proof of homeownership
How to conduct a credit check on a guarantor?
If your tenants require a guarantor, you should conduct a credit check on your guarantors the same as you would for tenants. You can use platforms like Experian, Equifax, mudhut and other providers on the market to credit check your guarantor or tenant. Credit checks may cost £15 to £30, depending on the provider.
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