A-Z of Lettings
G is for Guarantor
Often a Landlord or Letting Agent will ask for a guarantor for the rent payments before they let a property to certain individuals, e.g. students, DSS or low income earners. There may be a number of circumstances for this request. It is therefore essential that a potential guarantor understands the role and commitment they agree to. This blog will provide a brief outline of the guarantor responsibilities.
Who can Act as a Guarantor?
Usually a guarantor is a parent or close relative often referred to as a third party, who agrees to pay your rent if you don’t pay it. It is important to understand that the landlord can ultimately take legal action to recover any unpaid rent from your guarantor.
Most Landlords and certainly any diligent Letting Agent will require proof that the guarantor has sufficient funds / income to pay the rent if the tenant can’t. This will involve a credit check as a minimum and possibly proof of income or savings. As a rule most reference companies will require a guarantor income of 3x the value of the annual rent.
There is a legal requirement for a guarantee agreement to be in writing. The agreement sets out the guarantor’s legal obligations.
Is the guarantor only responsible for the rent?
In short the responsibility will be what is laid out in the agreement. Often the agreement will also extend to any damages caused to the property.
If an agreement does extend to other conditions of the tenancy, then it’s best that the guarantor checks the tenancy agreement. This way they can see exactly what obligations they are guaranteeing.
Landlords will usually want a guarantor who lives in the UK, as it’s easier for them to take legal action against a UK resident if they need to.
Is the guarantor responsible until the fixed term ends?
The term of the guarantor’s responsibility will depend on what is discussed to and signed for in the agreement.
Most agreements will be open ended and extend beyond fixed period stated on the agreement. Therefore once the tenancy has become periodic the guarantor is still responsible for rent should the tenant not pay. They may also be responsible to any variation in terms such as rent increases.
If this is the case, the guarantor’s liability may continue for as long as the tenancy exists and will only end if the tenancy is legally ended by:
- service of a valid notice to quit by the tenant, or
- by mutual surrender of the tenancy between the landlord and tenant, or
- a possession order from the court.
Variation in terms to the tenancy agreement
A variation in the tenancy agreement could bring the guarantor’s liability to an end. For example, a change to the rent or a renewal of the tenancy would count as a variation unless:
- the agreement said that the guarantee applies to any future variations or renewals, or
- the guarantor consents to the variation.
The guarantee agreement
We would highly recommend that the guarantee agreement is thoroughly checked before signing to fully understand when and how the guarantor liability ends. Some Landlords may be open to negotiation to enable limitations on liability. For example, by specifying the start and end dates the agreement applies to, such as the length of the original fixed term only.
Beware of Unfair Terms!
Sometimes a Landlord may use a standard or generic Guarantee agreement. In such cases if no discussion has taken place there may be terms within the agreement that could be deemed unfair if challenged in court. Such terms may create an unfair imbalance in favour of the Landlord.
If this is the case then it is worth contacting the Trading Standards Officer who can provide further guidance.