If the last year has proved anything, it’s that even the best tenants can hit a problem with their finances. And when tenants struggle to pay their rent, that leaves landlords vulnerable.
Once a tenant has been referenced and credit checked, you might have no hesitation in letting a property to them. Even so, you might consider taking out rent guarantee insurance*. But what about when someone seems otherwise perfect as a tenant, they just can’t provide the necessary proof of regular income, e.g. students or people who are looking for work?
Well, to give yourself peace of mind that you can still secure the rent even if the tenant defaults, you can ask them to provide a guarantor for the tenancy.
What is a guarantor?
This is a third party who agrees to pay the rent if the tenant can’t or won’t. They can also take responsibility for covering the cost of repairing any damage to the property. A guarantor is your – and the tenant’s – back-up plan.
Who can be a guarantor?
Anyone who is willing and – importantly - able to afford to take on the financial responsibilities of the tenant. It’s essential to carry out the same due diligence as you would on the tenant themselves, so the guarantor should also be referenced and credit checked.
Often, especially in the case of students, the guarantor is a parent, but it may also be a close family friend or an employer.
Ideally, the guarantor should be a UK resident, as it’s very difficult to enforce debts against people overseas. They should also hold assets, preferably property, so if they fail to pay you, there’s something to enforce a court claim against.
Do they need to sign an agreement?
Absolutely. The guarantor can either sign the tenancy agreement or a separate formal guarantor agreement, but the document must include:
- Their full name
- The tenant’s name
- The dates of the tenancy
- Details of the property
- How much they are prepared to guarantee (e.g. rent only or rent and any damages).
Note: The guarantee must be signed before the tenancy agreement, otherwise it might be unenforceable under contract law. It’s also sensible to have an independent witness to the guarantor’s signature.
The guarantor must sign another agreement to confirm they’re willing to continue being a guarantor if:
- The tenancy is renewed
- The amount of rent changes
- The identity of the tenants changes
If practical, you should meet the guarantor in person. If that’s not possible, we’d recommend you arrange a video call. Go through the paperwork with them, make sure they understand what they’re agreeing to and answer any questions. Also make sure you also take their address, contact number and email.
When can you claim from the guarantor?
This depends on the terms stated in the agreement that the guarantor signs, but it’s normally the case that you can contact them as soon as the tenant misses a payment. Quite simply, you can pursue the guarantor in the same way as you would the tenant.
Obviously, you should contact the tenant first if they default and give them the opportunity to make payment themselves. Then, if there is any issue, you can go straight to the guarantor.
On top of the financial safety net, an extra benefit of your tenant having a guarantor – particularly if it’s a parent - is that they’re generally far less likely to cause problems or damage the property!
At Your Move, we’re used to dealing with guarantors and have taken care of the process for numerous landlords. If a guarantor has never rented property themselves, they usually have questions and it’s important to be able to answer them accurately and confidently. If you’d like to speak to us further, please just contact your local branch any time.
*Please note for these insurance products terms and conditions apply. The information below is a summary only. You will receive a full policy document upon application. This policy will set out the terms, conditions and limitations of cover provided under the plan.
The Your Move Content Marketing Team
