Should landlords request a guarantor?

By Nichola Turpin, Debt Recovery Solicitor at Woodstock Legal Services

What is a guarantor and why might you need one?

Simply put, a guarantor is someone who has agreed to cover a tenant’s obligations under the tenancy agreement if the tenants are unable to. This can be for both overdue rent and damage to the property.

But it can also extend further than that, because in the case of joint tenancies (i.e. when multiple tenants all signed a single tenancy agreement), the Guarantor is guaranteeing the liabilities of ALL the joint tenants.

There are a number of reasons why a guarantor may be necessary. For example, the tenant could be on a low income, on benefits, have a poor credit history or even just simply self-employed and unable to sufficiently prove their income. In these situations, a guarantor provides that extra layer of security for landlords just in case something goes wrong.

If there is any doubt at all about a tenant, err on the side of caution and get a guarantor!

The benefits to having a guarantor

The simple and obvious benefit to having a guarantor is that it will give landlords some security over any unpaid rent and/or damage that might accrue.

It is always preferable (but not essential) for the guarantor to be a homeowner. The fact that they are a homeowner means that it is likely that they have some collateral, therefore if you do take action to reclaim any money, they have assets which can be claimed against. It is common that the tenants themselves are not homeowners (essentially, this is why they are renting).

You can check that the guarantor owns their own property by doing a search on the Land Registry Website for around £3.

As an added bonus, a guarantor can often provide a useful second contact should you have any problems with your tenant or should the tenant become uncommunicative.

Pitfalls to avoid

The most important thing to consider is whether the guarantor actually has the means to pay. All too often we have seen cases where a tenant has defaulted in their rental payments, but the guarantor is not actually in a financial position to cover the debt.  

When assessing a guarantor, it is important to look at their disposable income. On paper, their income may confirm that they earn enough to cover the rent if necessary but bear in mind that the guarantor will still have their own rent/mortgage and bills to pay too. Often landlords find themselves in a position where the guarantor is financially secure, but still does not have enough disposable income to cover an additional rental payment.

Another common mistake made by landlords and agents is in relation to the guarantor agreement itself. Firstly, it is important that the guarantor has had the agreement explained to them and they understand exactly what they are signing up for. Make sure they are aware that their agreement is enforceable and it’s always a good idea to get the guarantor to sign a copy of the tenancy agreement to prove that they were aware of what they were signing up to.

Finally, consider what happens in the event of a change in the tenancy. A rent increase or new tenancy/a renewal usually means that the guarantor agreement no longer applies unless either the guarantor agreement states that it will continue in these situations, or the guarantor agrees to the change.

It is always advised to seek assistance from a solicitor when drafting any guarantor agreements to ensure a landlord is sufficiently protected.