A Guarantor agreement is a type of surety given before a lease for property is agreed. The landlord or a managing agency can ask for it if there are any doubts as to the potential tenant’s ability to pay rent and any other required charges. This can occur if a future tenant is a student, has not lived in the same address longer than 6 months, is under the age of 21 or does not have any credit history.
A guarantor undertakes the tenant’s contractual obligations to pay rent on time, repair or reimburse any damage or additional costs to the property, as well as any other liabilities under the tenancy agreement.
Why have one?
Reasons why a guarantor agreement may prove useful are different for landlords and tenants but lead to the same outcome: to sign a tenancy agreement.
Advantages for landlords
Guarantor agreement is a very useful tool for landlords as it insures them against a risk of having tenants they would not otherwise have considered as eligible candidates for tenancy. A guarantor is an assurance that if the tenant is not in a position to pay his costs someone else will step in and save the landlord the trouble of demanding the money from his tenants.
Advantages for tenants
Having a guarantor agreement is beneficial for tenant who are not fulfilling the conditions of most tenancies such as students not willing to live in university’s halls of residence but who are not in full time employment and as such present a risk to their future landlords. Having a guarantor agreement in place can help them to be able to rent their dream property without having to sacrifice their education.
Who can be a guarantor?
The conditions to become a guarantor are similar to the ones applying to tenants since a guarantor will step into tenant’s shoes if they are unable to fulfil their obligations. The guarantor must be fully informed of the terms of the tenancy agreement and their duties, as they cannot be held liable for terms they were not aware of at the time of signing the agreement. Usually a guarantor will have to fill out a guarantor application form to provide their personal details as well as to enable a credit check to make sure they are in a financial position to pay the costs of rent etc. Landlords may also apply for references from guarantor’s employer or their landlord to confirm their reliability. Guarantors are usually related to the future tenants, parents quite often guarantee for their children however it is not a requirement. Some landlords may require guarantors to be homeowners.
How to draft a guarantor agreement
The guarantor agreement needs to have a form of a Deed of Guarantee and be signed as such. There are certain requirements as to what information should be covered in the guarantor agreement which include:
- The tenancy which the agreement relates to (if it is a fixed term tenancy, dates from and to should be included) as well as the address of the property
- The names of proposed tenant or tenants and their details
- The tenancy agreement itself to give the guarantor an opportunity to familiarise themselves with its terms
- Guarantor’s signature (the signing should be witnessed)
Quite often, especially with regards to student accommodation, the tenancy agreement will be for joint tenants who are all students and hence do not fulfill the necessary conditions to sign a tenancy agreement. In this situation all of them are individually and severely liable for all payments, which means that the landlord can seek to claim all of the liabilities from any of the tenants. From the guarantor’s perspective it means that he guarantees liabilities of all of the tenants. In this situation it may be advisable to have separate guarantors for each of the individuals parties to the tenancy agreement.
Whether you are a landlord wanting to ensure your tenant’s obligations are guaranteed by a suitable guarantor or a proposed guarantor for a lease, we can assist, both with drafting the guarantee, offering negotiating tips or generally. Please do get in touch for a free initial discussion.