Letting to Students
Student numbers in the UK are increasing year on year and there is always a strong rental demand from students in university towns and cities. Letting to students can be a rewarding business but it is important to protect your investment and ensure that rent is paid on time.
Carrying out comprehensive referencing on students and their guarantors can reduce the risk of rent arrears and protect you from problematic tenants.
Should my tenant have a guarantor?
Most students will expect to provide a guarantor when renting a property.
Signing up a guarantor can help ensure that your tenants stay on track with rent payments and can encourage them to take better care of the property. Making sure that tenants are aware that their guarantor is responsible for any outstanding rent or property damage is often enough to convince them to honour their commitments under the tenancy agreement.
We recommend that a guarantor is in place where a student is reliant on a student loan to pass affordability tests. There is an increased risk due to termly payments from Student Finance England and the compatibility with a monthly rent commitment. Furthermore, if the student does not continue with the course, future loan payments will not be made after the tenancy has been secured.
Who makes a good guarantor?
A guarantor is usually a parent or guardian but can be anyone over the age of 18, subject to status and their willingness to enter into a legal agreement. A suitable guarantor will have a clear credit history and be free from any CCJs or other adverse information.
It is important that a guarantor has a regular and stable source of income and that they earn enough to be able to pay the rent should it be necessary. If the potential guarantor is employed, you should ensure that they are on a permanent contract.
Does a guarantor have to be a homeowner?
Home ownership is a plus but not a necessity. Homeowners tend to stay at their address for longer than others who are living in rented accommodation, so there is a higher chance of being able to locate the guarantor should you need to enforce the agreement. Homeowners with a mortgage are also likely to have a better credit rating due to paying their mortgage on a monthly basis. If the guarantor cannot or will not pay, you may be able to obtain a charging order against the property, but this in itself is not a guarantee that you will be able to collect the outstanding rent – it will only secure the debt until the property is sold. If there is insufficient equity when the property is sold, you are unlikely to secure payment.
What if the proposed guarantor lives overseas?
We recommend that you only accept guarantors who are residents in the UK. Enforcing a guarantor agreement is relatively easy in a UK court but may be problematic or even impossible if the guarantor lives elsewhere.
What if the guarantor doesn’t pay?
The guarantor agreement sets out the guarantor’s legal obligations and this agreement can be enforced via court action, if necessary. Very often, the guarantor will want to avoid court action altogether so will work with the landlord to resolve the issue. There is a legal requirement for a guarantee agreement to be in writing, so that it is clear what the guarantor is responsible for.
What if my prospective tenant can’t find a guarantor?
Some private companies will act as guarantors in exchange for a fee, so it’s the private company that enters into a guarantor agreement with the landlord. Such schemes often require a co-signer to share the liability – as a result, the co-signer will also be responsible for any unpaid rent.
Some universities and colleges may also operate their own rent guarantor schemes and will sign as guarantors to assist their students.
Alternatively, you may feel comfortable proceeding subject to 6 months’ rent being paid in advance where there are no guarantor options available.
Do I need to reference the student in addition to the guarantor?
Some landlords will overlook referencing the students as they may not have any income or employment to verify. However, they may have some adverse credit history and a previous tenancy. We would recommend carrying out a credit check, as a minimum.
Can I get rent guarantee insurance for student tenants?
Most landlord insurance providers will provide rent guarantee insurance at their standard rates for students as long as they are fully referenced and have been approved in association with a suitable guarantor. Referencing should be completed within 30 days of the start of the tenancy agreement to ensure that the information is up to date.
How do I order referencing on students and their guarantors with NRLA?
For further information or to place an order please visit www.nrla.org.uk/services/tenant-checks.
You will need the name and email address of each tenant and guarantor, along with the rental property details.
