What am I Obliged to do as a Guarantor?
When you sign on the little dotted line and agree to be a guarantor, what is it exactly that you’re agreeing to do? With renting on the rise as house prices soar, we take a look at the role of guarantors, as let’s face it, they may start to be called upon more and more.
What is a Tenant Guarantor?
Many tenants may find themselves being asked to provide a guarantor. Circumstances in which you could be asked to provide one include those who are renting for the first time, have low income or are in education. This is because you are a riskier tenant than someone who has either rented before, or has a guaranteed income that can ensure the rent is able to be covered.
A lot of the time, the guarantor is a parent, (we all love our parents when it comes to financial back up!), or a close friend who is willing to pay the rent should you be unable to do so for any reason. Therefore, the responsibility for rent will be shared to the guarantor, not only for the rental payments, but also any damages or rent arrears that the tenant doesn’t pay.
To be a guarantor, you must undergo the same process as an applicant would go through. You will have your referencing checked and will be required, (pretty much always), to be in full time employment – obviously again to show that you have enough income to cover the rent of the tenant should they not be able to pay.
To give you an example, if you are a student, looking to rent in Norwich, you would more than likely use a parent as a guarantor. Your parent will then undergo the same checks, and therefore if the student spends too much in Topshop and finds themselves short when their rent is due, the parent will be notified and be expected to pay as the guarantor. Any damage left behind that is not paid for, will also be billed to the guarantor. (Probably best not to break the sofa and try to get away with it - leaving the bills to your, quite possibly angry, parents!)
The Risks of Being a Tenant Guarantor
In short, once you agree to be a guarantor, you can’t change your mind. Once signed, the only way to back out of the agreement is if the other party, usually the landlord, agrees to it; therefore, you are bound contractually for the period of time agreed/ length of tenancy. By signing a guarantor agreement to act as guarantor, you are legally bound to all the terms of the tenant’s contract.
Another situation a guarantor has to be wary of is the potential to be bound to an entire property even in the case of a house share. The tenancy agreement can make all of the tenants responsible collectively for rent and responsibilities. You could therefore be liable for the rent of other tenants than that of you are connected to. (Definitely have a thorough read and look out for this clause before signing – you don’t want to be paying for your son’s friends drunken breakages!)
If you have need any impartial advice about being a guarantor, click the image to take you to our contact page and ask us!
For Landlords - Is a Guarantor a Definite Guarantee?
When it comes to the guarantor being called upon, the matter of paying isn’t always so simple. Important details to check with a guarantor include the exact wording of the guarantor agreement. When the rent becomes overdue and the tenant is unable to pay, contact the guarantor straightaway, quoting the guarantor agreement directly.
There are instances where this can turn into a financial dispute, despite a legally binding agreement. Mediation services or solicitors may need to get involved and in some cases this can become a costly ordeal for a landlord. Is it really worth a lengthy legal battle?
Why is a Guarantor Important?
Although a guarantor can be complicated and of course not always reliable, (despite being contractually obligated), it does double the chances of the rent being paid. You may like your tenant, you may trust that they will pay you rent on time, but you can’t predict that the tenant may not get into financial difficulty and therefore no longer meet the rental payments.
A guarantor is usually a relative, with an invested interest in the person they are financially guaranteeing. A lot of the time, this means they want to help the tenant and will pay in order to get them out of difficulty.
Although the guarantor has an invested interest in the tenant usually, and a guarantor themselves must be financially stable in order to act as a guarantor, it comes down to responsibility.
The guarantor may still feel as though it’s the tenant’s responsibility, and although agree to sign a guarantor contract, they may be unaware of what exactly it is they are signing for and under what terms they are actually expected to pay.
Our advice would be to any landlord’s is to always focus more heavily on the tenant. If the tenant is of quality and is able to prove they are able to meet their rental payments, then although a guarantor is perhaps an extra bit of comfort to a landlord, they should never even need to hear from you. All parties are happy this way.