If you’re a landlord with a rental property, chances are you will eventually have to deal with guarantors. The purpose of a guarantor is to protect you, the landlord, should the tenant default on their rent, so it’s crucial to set them up right at the beginning of the tenancy. Want to know more? Read on for a full guide to guarantors.
What is a guarantor?
A guarantor is someone who signs a contract to agree to cover a tenant’s financial responsibilities for your property, if they cannot. The guarantor (who is usually the tenant’s parent or guardian) promises to pay the rent if the tenant defaults, as well as any other costs incurred by the tenant – e.g. expenses or damages to the rental property. Guarantors are most commonly used for students, but they can be useful in any situation where there is a risk that the tenant might not be able to pay (e.g. they have a low income or poor credit rating). It is up to you to decide whether you want your tenants to provide guarantors.
Who can be a guarantor?
In order to ensure that they can fulfil the obligations they sign up to, there are certain restrictions on who can be a guarantor. In the UK, a guarantor must be a UK resident between the ages of 18 and 75, and they must have a good credit history. Usually they are also expected to be employed, with a high enough income to cover the rent for the tenant, if required. It’s important to note that the guarantor is making the same financial commitment as the tenant, so if your tenants are joint and severally liable for the property (i.e. they are all individually responsible for the full amount, even if one tenant defaults), then so are their guarantors.
How do I set up a guarantor?
A guarantor must go through a similar process of reference and credit checks to the tenant, to make sure that they can honour their side of the contract. Just like your tenants will fill out an application form to live in your property, so too must their guarantors. You can then run a credit check and ask for references, and decide whether you feel confident having this person as a guarantor. If you do, then you and the guarantor sign a contract (or include it in the tenancy agreement) to make it legally binding. Remember, a guarantor cannot be held responsible for any obligation that is not laid out in the contract, so make sure your contract contains everything you need.
When should I use a guarantor?
If your tenant defaults on their rent or refuses to cover any other costs they are responsible for, that is the time to bring in their guarantor. Because you have previously vetted the guarantor, chances are you will be to get the money without too much trouble, and the law will be on your side if they refuse to pay. The guarantor might also be able to get through to the tenant in a way you cannot (especially if they are a relative), so they may be able to get the tenant to pay with their own money instead. Remember, having a guarantor is essentially a safety net – they provide peace of mind, and fortunately you will most likely not have to use them.
Do you have a property to let in Bristol? Gough Quarters can help you to find guarantors and rent out your property.