Renting out a property can be much easier when you have peace of mind. Many types of tenants you might take on, such as young people, will not have established track records of renting. It therefore makes sense to have prospective tenants find someone who will guarantee their rent (a “guarantor”).
What does a guarantor have to do?
In short, a landlord can ask for rent from a guarantor if the tenant cannot pay. They are under a legal duty to pay the landlord. Often tenants may enter into a “joint tenancy” which creates a singular obligation amongst all individuals to pay the entire rent, and so any guarantor they choose will be liable for the whole sum. Landlords normally run a credit check on the guarantor to ascertain whether they are suitable to rely on for payment.
What are the requirements for a guarantor?
A very common request from landlords is that any guarantors are based in the UK. This allows the landlord to properly assess the guarantor’s financial credentials and to reduce the potential cross-border legal implications of making a claim against the guarantor. If the tenant is a foreign national, a UK guarantor may be harder to find, resulting in a higher deposit. Often, the landlord may be looking for certain thresholds of wealth in a guarantor, such as owning a property or earning a minimum salary. A homeownership requirement in particular is often used for two reasons. A home owning guarantor is easier to track down, and they have some collateral for any debt claims that go to court. A guarantor does not have to be a parent or family member, though they are the most likely to take on such a financial commitment.
What are guarantors liable for?
Guarantors’ liability depends on the terms of the agreement. Though paying rent usually is the mainstay of any guarantee agreement, it often extends to other conditions under the tenancy such as any damage caused to the property. It is advisable for a guarantor to check the terms of the agreement closely to see exactly what obligations they are taking on. Many guarantee agreements are broad, only referring to liability ‘under this tenancy/agreement’. In other words, liability could extend beyond the fixed term to any point in time, as well as applying to certain changes such as rent increases. If this is the case then the guarantor’s liability will only end once valid notice is given to quit by the tenant, a mutual surrender of the tenancy, or a court possession order. However, if the tenancy becomes a periodic one then the guarantor can give one month’s notice to discharge their liability.
What are unfair guarantor agreements?
As consumer contracts, guarantor agreements are regulated by statute, and certain clauses will not be permitted to stand. A court will release a guarantor from liability if variations to the tenancy agreement, which include rent increases or periodic tenancies, are made which substantially increase the burden on them. If the guarantee purports to cover any form of extension or variation to the contract then this will be struck down as well. Other terms which may be regarded as unfair and struck down include those which give the landlord certain powers, such as being able to extend the tenancy automatically, alter the terms of the tenancy without a valid reason which is specified in the contract, or claim large default sums if the tenancy is breached.
From looking for the right tenant to making a property safe, creating a tenancy agreement is only one of several responsibilities of a landlord. Legislate is a contracting platform where you can create easy-to-understand and legally valid agreements on your own terms. You can read how to create your first Legislate agreements in our tutorial or watch a short demo. If you would like to try Legislate, please book an introductory call.
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.