Using a guarantor for renting can smooth the process in many situations.
Guarantors are a secure way of improving the likelihood that those who do not meet the normal requirements of a regular tenancy agreement will pay the rent.
Guarantors must live in the UK, a homeowner or have assets, receive an income that meets the affordability criteria and a relative or a family friend of the tenant.
Using a guarantor for renting: our best tips
- Ensure that your prospective tenant is aware before the tenancy begins that you may share details of rent arrears other breaches of the tenancy agreement with the guarantor. Also, that this is reflected in the landlord`s Fair Processing Notice.
- Send a Fair Processing Notice to comply with GDPR regulations May 2018 to the prospective guarantor.
- Reference check the guarantor and send them a draft copy of the tenancy agreement before the tenant has signed it.
- Send the guarantor a letter of guarantee for signing with a covering letter.
We would recommend a full affordability check on the guarantor as well. If the landlord has purchased a rent protection insurance, this is usually the requirement.
The guarantor letter should include some vital points, such as the names of the landlord and tenant and the address of the rental property. It should be signed and dated by the guarantor as well as the witness, as legally this is a deed. The letter should also contain an explanation of what the guarantor is liable for, i.e rent arrears and damage. It should also include a description of the guarantor’s liability, as in the case of a jointly and severally liable tenant, this could extend beyond the individual`s rental ability. In England and Wales only, if the initial tenancy is a fixed-term tenancy, if the tenancy becomes periodic at the end of the fixed term, the guarantor agreement continues.
Include a covering letter where you can explain that the guarantor may need to seek legal advice.
Urge them to make sure they have read and understood the terms of the tenancy agreement and highlight any key documents that you enclosed with the letter.
Landlords should include the guarantor`s details on the tenancy agreement. Otherwise, this could cause mistakes and confusion. The guarantor is not a party to the tenancy.
Using a guarantor for renting: the recommended procedure
- Reference prospective tenant
- Then reference prospective guarantor
- The guarantor signs The Guarantor Agreement. The guarantor must have sight of the tenancy before it is signed by the tenant.
- The tenancy agreement is signed by the landlord and tenant
If there is a guarantor for one individual in a joint tenancy, then that guarantor is also liable for the other three tenants in the property. In fact, legally this is a jointly and severally liable tenancy.
In the event of a claim in England and Wales where there are five or more tenants, and all tenants and the guarantor are jointly and severally liable, a judge may only hold the first four tenants liable. It is therefore important to consider the order in which the tenants are listed on the tenancy agreement. Ensure that those with guarantors are among the first four.