When Might You Want To Use A Guarantor?
12th January 2018
Sometimes, you'll do a background check on your tenants including a credit check and reference checks but the results will come back inconclusive, perhaps they're first time renters, on a low income or they have a poor employment history, on benefits or ultimately don't instill confidence in you as a landlord to let your property to them on the current basis.
However, perhaps you understand their reasoning behind whatever issues you may have and decide to ask for a guarantor to support their tenancy application.
What is a guarantor?
A guarantor is somebody who guarantees the tenant will pay their rent and if they do not pay their rent, the guarantor takes responsibility and the landlord can ask your guarantor to pay the rent instead of you. Agreeing to be a guarantor is legally binding and you can find out more about the legal responsibilities of landlords here. In other words, A guarantor is an individual, maybe a close relative, who will assume paying the rent if the tenant fails to pay.
The guarantor will enter into the tenancy agreement consenting to meet the full legal obligations of the tenancy agreement on the tenant's behalf. This may include damage to the property, rent arrears, or other obligations or liabilities of the tenant to a landlord arising from the tenant's failure to comply with the lease covenants.
The guarantor is contractually bound to accept the tenant's legal liabilities and they will be sued if they don't comply. To satisfy the requirements of a good credit score to become a guarantor, they usually need to be a homeowner who has been in long-term employment.
It is best practice to require the guarantor to be a homeowner, in full-time employment and a good credit history. The reason for homeownership is that it is harder for the guarantor to avoid you, as a result, it is important to ask guarantors for proof of homeownership. You can also conduct a search on the Land Registry provided the owner of the property is registered; this costs £2.
You should attempt to meet the guarantor face to face to explain what is involved. If then, you are happy to proceed and they are still willing to be a guarantor, you could get them to sign a Deed of Indemnity, a legal agreement that will contain the terms and explain how you will indemnify, or cover for, the legal costs and liability incurred by the tenant or guarantor when recovering monies owed. If you get the guarantor to sign the tenancy agreement before the tenant, then a Deed of Indemnity is not required as these terms can be set out in the tenancy agreement.
Hopefully this quick guide has given you a better understanding of when you might need to use a guarantor but if you need any help with adding a guarantor to your tenancy agreement or any other aspects of constructing your landlord agreements, get in touch via the contact link at the bottom of the page and we will be happy to help!