Rent guarantor – know the risks
If you are asked to be a rent guarantor for a child or another close relative or friend then there are several factors that you should take into account before you sign any agreement.
Many landlords ask for a guarantor who will pay the rent on behalf of the tenant if they don’t pay it, however, depending on the terms of the agreement, the guarantor could also be responsible for much more.
Depending on the terms of the tenancy agreement and guarantee provisions, the guarantor could also be responsible for paying for any damage caused to the property and other costs that the tenancy agreement may make the tenant liable for, such as the landlord’s legal fees to recover possession of the property.
If the accommodation is shared and the sharers rent under a single tenancy agreement, then it is also common that the guarantee applies to all of the rent, so you could end up having to pay for your child, relative or friend’s sharers as well. It might be possible to agree with the landlord that your guarantee only applies to a specific share of the rent and/or any damage caused by the tenant for whom you have provided
There is a legal requirement for a guarantee to be in writing and the guarantor should be able to see a copy of the tenancy agreement in advance as well, to understand exactly what their obligations are. Normally, the guarantee provisions will be included in the tenancy agreement itself, but if they are in a separate document the guarantor should make sure they see the lease before signing the guarantee.
Depending on how the guarantee agreement is worded, it is likely to be open ended, and may provide for the guarantor to remain liable if the tenancy continues after the initial period of 6 or 12 months, so understanding how it can be ended is important. If the guarantor’s liability lasts for as long as the tenancy exists, it is only ended if the tenancy is legally ended by:
- Service of a valid notice to quit by the tenant
- By mutual surrender of the tenancy agreement between the landlord and the tenant or
- A possession order being granted by the court
A variation in the terms of the tenancy agreement could also end the guarantor’s liability, unless the guarantor agrees to the changes.
A provision in the original tenancy agreement or guarantee saying the guarantee applies to any future changes or renewals will not always
Some landlords might be approachable and agree to limit the guarantor’s liability, such as by agreeing a start and end date or that the guarantee is applicable for the length of the original agreement only.
Peter Burfoot comments: “Unfortunately some people get a really nasty shock when things go wrong and they are approached for missed rent payments and other major costs. This can be especially difficult if the relationship between the guarantor and the tenant has also broken down or if there is a liability for the default of someone who is sharing with your child, relative or friend. All guarantors should ensure that they fully understand the implications of what they are signing and their legal and financial liability. Guarantees and Indemnities are a complex subject and if in any doubt my advice is to try to avoid being a guarantor, as some have unfortunately found themselves many thousands of pounds out of pocket, with no end in sight.”