If you’re asked to be a guarantor for the payment of rent, there’s a good chance it’s a family member, or you are very close friends with the person who is asking. Agreeing to a guarantor service is a big responsibility, and it’s one that you should take seriously. So what does it mean to be a tenant guarantor for rent?
A tenant guarantor is someone who agrees and is legally bound to pay the monthly rent and any damages that may occur to the property if the tenant does not, or cannot, pay. The guarantor must provide documentation that they are financially able to honour the guarantee if the tenant defaults.
Before you agree to be a guarantor for a potential tenant, make sure you understand your obligations!
If you agree to become a guarantor, you will likely be helping someone who wouldn’t otherwise be able to become a private renter. That is a good thing. But it’s a big financial responsibility, and there are risks attached, which you need to understand before signing anything.
A guarantors agreement is an essential document as it can help protect both the prospective tenant and landlord if something happens and the tenant doesn’t meet the terms of the tenancy agreement.
In an ideal world, the guarantor will not hear from the landlord once the tenancy agreement is in place and the tenant moves into their new home.
However, there are occasions when the tenant doesn’t pay their rent, and the landlord asks the guarantor to honour the guarantee. If the guarantor doesn’t pay, the landlord can take legal action against them.
Likewise, if the tenant has caused damage to the property and refuses to pay, the landlord can approach the guarantor to ask for the money owed.
If applicable, during the application process, think about any co-tenants that may also be on the rental application if it’s a joint tenancy. Depending on the wording of the deed of guarantee, you may be responsible for their rental payments and any damages they cause too.
Shared living accommodation has become very popular in recent years, not just for university and college students but also for working professionals. So you mustn’t overlook this.
The guarantor’s legal responsibility will depend on the exact wording of the guarantee or tenancy agreement or both.
Advice For People Considering Being A Guarantor
- Read the guarantor agreement carefully.
- Read the tenancy agreement carefully.
- Ask for more information if you have any questions.
- Seek legal advice if there is anything you don’t understand.
The main thing you need to understand is you will be held responsible for any rent the tenant doesn’t pay and any cost associated with fixing any damage or other expenses caused as per the tenancy agreement.
In addition, if the tenant is sharing the property, you could be responsible for a share in any damage caused by other parties.
When Does A Guarantor’s Legal Responsibility Start?
The guarantee agreement will stipulate when your legal responsibilities start. If other tenants provide guarantors, ensure that the contract clearly states that you will only become responsible when all the co-guarantors have signed.
If you’re the first to sign, and the others don’t, you could be held responsible for everything. So it’s in your best interest to ensure that the other co-guarantors need to sign before the agreement takes effect.
Be aware that even if there are other guarantors, a landlord doesn’t have to take action against all guarantors but can choose to pursue the one that’s most likely to pay up.
When Does Your Legal Responsibility End?
A tenant guarantor agreement will specify when your legal responsibilities will end. Typically, this is when the property is returned to the landlord in the same condition when you took over as guarantor.However, if the tenant has caused damages, your responsibility will continue until the repairs or replacement costs have been recovered.
You may be responsible for however long the tenancy agreement lasts, including any rent increases. So it is worth checking how long the tenant plans on staying so you know exactly how long you will be expected to be a guarantor.
Other points to consider unless the guarantee states otherwise:
- You are still liable if you fall ill or lose your job.
- If the tenant is declared bankrupt, the extent of your liability will depend upon the wording.
- If you die, the landlord may be able to claim against your estate.
If you are not willing to be a guarantor without a confirmed end date, a good option is to request that an end date be added to the guarantee.
If the tenant wishes to stay beyond the end date, the landlord and tenant can discuss the best way forward, which may not rely on finding another guarantor if the tenant’s annual income has increased and acquired a good credit score.
If the tenant fails to pay the rent, court proceedings could be imposed against you for up to 6 years after the event if you do not cover it.
Can You Ask For Changes To The Deed Of Guarantee?
If anything in the guarantee seems unfair, you or the tenant can ask the landlord or property manager to change the agreement before it is signed. For example, you may want to include a set period where the deed of guarantee is in force.
It’s also a good idea to stipulate that you will only be liable for any debt owed, divided by the number of tenants, so you are only responsible for a portion of any debt.
Some landlords may not be willing to limit a guarantor’s liability so that they may disagree, but it would still be worth asking before you make your decision as to whether to sign or not.
Does Being A Guarantor For Rent Effect Your Credit Score?
Before becoming a guarantor for rent, the lender will carry out a credit check on you. They will usually perform a “soft” credit search that won’t be visible to other companies and affect your credit score.
However, if the tenant defaults on their payments, the debt owed will be added to your credit report, and if you fail to make the payments, your credit rating will be affected.
Guarantee agreements can vary from lender to lender, so it’s essential to check the terms carefully before signing.
If you are still unsure how the guarantor agreement could affect your credit report, you should speak to the lender directly. Maintaining your credit file in good standing is paramount to avoid a bad credit score.
Additionally, guarantors should be aware that agreeing to this type of agreement may impact their ability to secure future loans.
How Much Do You Need To Earn To Be A Guarantor?
As a general rule, guarantors are expected to earn at least three times the annual rent payments of the property to be approved. Guarantor background checks are very similar to tenant background checks, and lenders will consider any criminal history, bankruptcies, and liens on their credit report.
Income requirements to be approved as a suitable guarantor will depend on the month’s rent being charged. Financial stability also plays a vital part in the screening process to ensure that you can cover any unpaid rent.
During the background check, homeownership is not a necessity but is considered a plus, and proposed guarantors must be residents in the UK with valid identification.
Acceptable sources for proof of income to be a guarantor for rent payments included:
- Self-employment (including sole traders, rental income and company directors)
- Overseas income
A potential guarantor who has low income, poor credit or a low credit score will unlikely be approved.
How Long Does A Guarantor Stay On A Tenancy Agreement?
A guarantor will stay on a tenancy agreement for the time specified within the contract. However, there is no set duration for guarantor agreements, so the guarantor can request a change to the terms of the agreement before signing if they are not happy with them.
Anyone considering being a guarantor should check whether they will still be liable after the ‘fixed term’ of a tenancy agreement ends. Fixed terms are typically 6 to 12 months before becoming a rolling contract. Beyond a fixed term, the tenancy must be brought to an end by either the tenant or landlord.
If you are concerned about your guarantor’s liability continuing beyond the tenancy agreement’s fixed term, you should speak to the landlord or letting agent directly.
They may, or may not, agree to any changes. Just make sure you check this detail before signing anything.
Can You Get Out Of Being A Tenants Guarantor For Rent?
There are only a few scenarios that will allow you to get out of being a tenant’s guarantor before the agreement is due to expire. They include:
- The landlord or letting agent will enable you to surrender your legal obligations.
- If the deed of the guarantee allows you to give notice, which will typically be two months or more.
- If any term of the tenancy agreement changes, such as a rent increase, then the guarantee will automatically end.
- If a new tenancy agreement is introduced and signed by both parties.
If you are considering being a guarantor for someone, make sure that there is a specified end date within the deed of guarantee.
People’s circumstances change all the time, whether yours or the person you have kindly agreed to help, and sometimes with short notice.
So it wouldn’t be unreasonable for you to stipulate that you are only willing to assist for 12, 18 or 24 months. Just make sure you do not agree to be a guarantor indefinitely, whether for a close relative or a close friend.
In conclusion, being a rent guarantor is a kind thing to do, but risks are involved. If you consider being a guarantor for someone, make sure you understand those risks and are comfortable with them.
Read the deed of guarantee and the tenancy agreement very carefully. Do not hesitate to ask questions if you don’t understand or request any changes if you think the terms are unreasonable.
If you still have any questions or doubts, be sure to seek legal advice before making any decisions.