We hope this article will help those thinking of standing as a guarantor and landlords seeking a guarantor. So, you know what is involved, what the risks are becoming a guarantor.
A guarantor may be required for renting a property, applying for a loan and the typical reasons where one is required are:
- people with bad credit history
- people with no credit history
- They have a bad credit history by using a guarantor they can obtain an affordable APR
Each time I have litigated, and the case involves a guarantor almost in all cases; the Guarantor will try to find a way to wriggle out of the agreement.
The common response when a guarantor receives a claim from the county court is:
I only stood as a guarantor for the fixed period of the tenancy.
As many landlords know the time you need to call on the Guarantor is when the fixed term of the tenancy has expired, the tenant should move out, but will not do so.
In some cases, not only will the tenant not move out but fails to pay any rent or may have caused damage to the property.
It is at this stage the guarantors have a rude awakening. Often the tenant just like the landlord avoids the Guarantor like the plague.
Most guarantors may be close family or friends and feel they cannot say no, or do not know the legal implications of being a guarantor.
Even good tenants after a few years can have a transformation and turn out to be tenants from hell.
Landlords should when serving a section 8 notice for rent arrears or damage to a property serve a copy of the section 8 notice on the Guarantor too.
If the guarantor agreement is written well, a guarantor is unlikely to find a defence for fighting any claim against them.
What are the requirements to become a Guarantor?
Anyone can stand as a guarantor, however, to be a guarantor a landlord/agent needs to ensure the legal requirements that must be met, like:
- Guarantor must be 18 years old or above
- Must not be bankruptcy
- Must have the mental ability to fully understand the guarantee documents they sign
- They must accept the conditions without undue peer pressure
What is a Tenant Guarantor?
A “Guarantor” in property contracts is usually a friend or a close family member of the tenant. A guarantor is someone who has agreed to stand for the tenant and accept legally bidding liabilities on behalf of the tenant.
Should the tenant fail to meet their legal obligations under the tenancy agreement, rent arrears or, damage to the property? A Guarantor is legally obliged to accept the liabilities on behalf of the tenant.
Some guarantors, as an afterthought, will try to cancel the guarantor agreement. A common question many guarantors ask is:
How can I stop being a Guarantor for a tenant?
My son has fallen into rent arrears, and I am my son’s Guarantor. How do I get out of being liable for the debt?
Should I refuse to stand as a guarantor?
Most cases standing as a guarantor is fine and causes no problem for any of the parties. But you must know the prospective tenant very well indeed. They must be honourable and ideally very close family. There are all sorts of situations where you must have a guarantor. It may be the tenant has a CCJ or low income but may be able to claim some benefits to service the tenancy.
Do I need a guarantor?
It is surprising how often a guarantor is required by a landlord or letting agents.
Generally, as stated above, a guarantor is required if a prospective tenant has a poor credit score or if they are a high-risk tenant, such as a DSS tenant, student or if the tenant has a low income.
Landlord providing a tenant with a home also need to understand that under COVID-19, it is tough for many tenants to make ends meet. Some tenants may have limited disposable income and landlords should consider these tenants carefully.
It is against the law to refuse a housing benefit tenant a tenancy for the mere fact they are on DSS.
When considering the suitability of guarantors, a landlord should look at a potential guarantor’s income and credit history. Many landlords and letting agents insist on guarantors to be homeowners.
What to consider before becoming a tenant Guarantor
You must accept that a possibility exists that you may be called to make good rent arrears, damage to the property and possibly legal fees too. If you do not have the financial means to wish away say possibly £15,000 do not do it.
A lot of guarantors have this mindset that they have known Mick from their local for 15 years he is sound as houses. Do not stand up as a guarantor if you have not had a long-standing financial relationship with the prospective tenant.
It is vital you find out why a guarantor is required?
It is obvious, but you want all the information why a guarantor is required, and you need it from the source from the prospective landlord or letting agent, get it in an email, so you have it in black and white. Do not rely on what the prospective tenant is telling you, do not make this mistake.
The reasons a prospective tenant is deemed high risk is something you want to consider, ponder, and dig further on before you agree to become a guarantor.
Am I being pressured into being a Guarantor?
This is very common, mostly the pressure is subtle and maybe psychological too. You may feel you cannot say no, if you do, they may lose the property. You may be concerned about what other friends or family may say if you say no.
What are the benefits of being a guarantor?
In a nutshell none, most people who stand as a guarantor do it because it makes them feel better than they have helped someone because they are a nice person.
Or feel they must; they feel they cannot say no.
Members can download a free guarantors agreement
Source: British Landlords Association
Author: Sarah Featherstone firstname.lastname@example.org
Date: 15th of September 2020
The British Landlords Association is a free national landlords association, why not join us today for free?
Have you taken the free landlord COVID-19 course?
Free legal advice for BLA members – Landlord Advice UK