Guarantors can be comforting for both tenants and landlords alike. Although having a guarantor for tenants reduces risk for landlords, claiming against a guarantor still involves the courts which is complex and expensive.
With landlord’s increasingly worried about securing their rent income during Covid-19 is requesting a guarantor the answer? Saiful Ahmed, Legal Adviser at DAS Law, tells you what you need to know.
How difficult is it to claim against a guarantor? What is the process?
You may consider adding a guarantor to your tenancy agreement for extra security to ensure that if for any event your tenant fails to pay rent, there is another party who has agreed to pay rent and therefore someone you can pursue to cover the shortfall.
The guarantor will have to sign a guarantor agreement which confirms their responsibilities under the tenancy and when they have to pay. Just like with any agreement, there can be a breach of contract by the party you have entered into the agreement with. If for any reason the guarantor fails to honour their side of the contract, the guarantor agreement can be enforceable, meaning you are able to pursue them legally for any shortfall in rent.
I don’t normally accept a guarantor. In what situations should I consider one?
The use of a guarantor is especially relevant where the tenant you are considering has a poor (or no) credit history in the UK, is a student, or renting for the first time. If the tenant was to fall into arrears, the guarantor would be liable for this shortfall, increasing your options on who you can pursue.
When accepting a guarantor, what do I need to be aware of? How do I protect myself?
You can never eliminate any risks completely but you can manage them by taking precautions before entering into any agreement with the proposed guarantor. To make an informed decision on whether the person being presented will be a reliable person to accept as a guarantor, you may wish to carry out a credit check on the person, asking for proof of income, savings and any other relevant financial information. With this to hand, you are able to make a more informed decision as to their affordability.
Who would make a suitable guarantor? If I’m using a referencing agency what sort of checks would I expect them to make?
Guarantors can be anyone but are usually a family member or someone who is close to the tenant. With reference checks, you would expect checks such as proof of income of the guarantor, if they have any savings and any other relevant financial information. All of these checks should be carried out to assess the affordability and financial status of the proposed guarantor.