Should landlords request a guarantor?
As a landlord in the UK, finding reliable tenants is essential for the success of your rental business. In some cases, requesting a guarantor can provide an extra layer of financial security. Landlord and Tenant lawyer Anna Hughes of Woodstock Legal Services explains what a guarantor is, the benefits of using one, and the potential pitfalls to avoid.
What is a guarantor, and why might you need one?
A guarantor is a person who agrees to cover a tenant's financial obligations under the tenancy agreement if the tenant defaults on payments. This can include overdue rent or damage to your property.
There are several reasons why a landlord might request a guarantor, including:
- Tenants with limited income: Students, those on low incomes, or self-employed individuals with fluctuating income streams may benefit from having a guarantor.
- Tenants with poor credit history: A guarantor can provide reassurance if the tenant has a less-than-perfect credit score.
The benefits of having a guarantor
Having a guarantor offers landlords significant advantages, primarily providing peace of mind knowing that someone is financially responsible if the tenant cannot pay.
Ideally, your guarantor should be a homeowner. This increases the likelihood of recovering any unpaid rent or damages, as they may have assets to use for repayment. You can easily verify a guarantor's homeowner status through the Land Registry website. A guarantor can also serve as a valuable alternative contact if you have difficulty reaching your tenant.
Pitfalls to avoid with a guarantor
While having a guarantor offers benefits, it's crucial to proceed with caution. Here are some key pitfalls to be aware of:
- Guarantor's financial capacity: Before accepting a guarantor, ensure they have the financial means to cover the rent if necessary. Carefully assess their disposable income after they've paid their own living expenses.
- Watertight agreement: Ensure that the guarantor agreement is watertight when drafting the terms as it is such an important document. You should also consider if the agreement must be signed as a deed to ensure it is an enforceable document. In both of these scenarios, professional legal advice should be sought.
- Understanding the agreement: Make sure the guarantor fully understands the terms of the guarantor agreement and their legal obligations. It's advisable to have them sign a copy of the tenancy and to ensure you provide them with a copy of the tenancy agreement.
- Changes to the tenancy: Remember that rent increases, tenancy renewals, or other changes to the tenancy agreement may affect the guarantor's obligations. Always seek legal advice from a solicitor when drafting or updating a guarantor agreement.
Specialist Advice for Landlords from Woodstock Legal Services
If you have questions about using a guarantor or need help drafting a legally sound guarantor agreement, our experienced landlord solicitors are here to help. Contact Anna Hughes, Director and Head of our award-winning Landlord and Tenant Team, by emailing [email protected] or completing the form below.
