For some landlords, the very mention of guarantors can ring alarm bells. But they’re written into more tenancy agreements than you might think, and needing one isn’t necessarily a sign of problems ahead.
Even well-paid professionals with a glowing landlord’s recommendation can fall short in the referencing process, so it’s wise to have an understanding of what it means to have a tenant with a guarantor.
So, in this week’s blog, we’re taking a look at:
- The profile of a guarantor
- A guarantor’s responsibilities
- Why a tenant might need a guarantor
- Referencing a guarantor
- Claiming from a guarantor
Once we’re done, and whenever you encounter a tenant who needs a guarantor – either upfront or after you’ve taken up references – you’ll have everything you need to make a confident decision.
WHO CAN BE A GUARANTOR?
When a tenant doesn’t quite pass the referencing process, the checking agency might still recommend them if they can supply a guarantor.
- Guarantors need to be over 18, have a good credit history, and be able to show sufficient savings or income to cover the rent or damages.
- They’re usually a close relative or friend of the tenant, but in some rare cases, the guarantor could be their employer or even a client.
- An acceptable guarantor must be a UK resident who can prove they’ve known the tenant for at least two years.
Regardless of who the guarantor is, it’s essential to fully explain their financial and legal commitment, particularly as some responsibilities (covered next in the blog) can come as a surprise.
WHAT ARE A GUARANTOR’S RESPONSIBILITIES?
While a guarantor will expect to be named on and sign a tenancy agreement, they may not understand all that it means, so it’s up to you to ensure they are fully aware and accept all the terms of the contract.
- Stepping in to pay any rent arrears, and make ongoing rent payments if the tenant defaults, for the entire length of the tenancy.
- Paying for any damages by the tenants that exceed the security deposit amount, both during the tenancy and for those identified in your inspection after it ends.
- Receiving a County Court Judgement (CCJ) against their name if successful legal action is taken to recover any of those costs.
One thing guarantors are not responsible for, is monitoring how well your tenants are looking after your property, so make sure that you or your managing agent carry out regular mid-tenancy inspections.
WHY COULD A TENANT NEED A GUARANTOR?
More tenants than you might think have guarantors, and using one is no indicator of problems ahead. In fact, a guarantor can offer a valuable extra level of security if a tenant ever hits hard times.
Some of the typical reasons a tenant may need a guarantor include:
- Having an income or credit rating that doesn’t meet the requirements of a referencing procedure.
- Working part-time, having irregular or intermittent work, being a full-time student (including post-grad), or renting for the first time.
- Moving to – or back to – the UK for work or personal reasons, and having little or no credit, employment or address history.
Basically, there are plenty of perfectly legitimate grounds for a tenant needing a guarantor that have nothing to do with a lack of reliability or responsibility.
HOW DO YOU REFERENCE A GUARANTOR?
Although referencing a guarantor is similar to referencing a tenant, you’ll need some additional information because of the extra responsibility they are taking on.
So make sure you get:
- A full credit check, including searches for any County Court Judgements (CCJs), bankruptcies or insolvencies.
- Proof of address, how long they’ve been there, and confirmation of whether they own the property and how much their monthly mortgage payments are.
- Evidence of income from employment, pensions or investments to prove they can cover their own living expenses as well as any unpaid rent or damages if required.
Once a guarantor passes this process, you’re good to go with adding them to the tenancy agreement, which they also need to sign along with the tenants.
If they fail on any count, we suggest erring on the side of caution and politely saying no. Otherwise, you could invalidate your landlord insurance policy or break the terms of your mortgage.
HOW DO YOU CLAIM FROM A GUARANTOR?
As with any tenancy dispute, the first resort is to try and resolve matters with the tenant. If you can’t, a guarantor provides another chance to clear things up before resorting to legal action.
Bear in mind that the guarantor could have no idea of the situation (often because the tenant is too embarrassed to say anything). So keep a level head and take the following steps.
- Write to the guarantor and tenant (email is fine at this stage) with details of the outstanding amounts, evidence of non-payment of rent, or receipts and photos of damages.
- If you get no response or an unsatisfactory reply, send a formal letter of demand by recorded delivery to both the tenant and the guarantor, requesting payment within a specified period.
- Provide a reasonable deadline to allow the tenant and guarantor to rectify the situation, but let them know that further action will be taken if the matter isn’t settled.
Unless there’s a dispute, a guarantor will usually settle things by this point to avoid legal proceedings, but if you do need to escalate things, take a look at our blog on getting your property back.
Do you own a rental property?
If you have any questions about guarantors or anything else to do with being a landlord, we’re here to give you answers!
Call Richard Cook on 0790 909 3141 or email him at richard.cook@fifeproperties.co.uk for a friendly and expert chat about making the most of your buy-to-let and getting a premium rent.
