A guarantor is a person who guarantees to pay for someone else’s debt if he or she should default on a loan obligation. A guarantor acts as a co-signer of sorts, in that they pledge their own assets or services if a situation arises in which the original debtor cannot perform their obligations
With residential tenancies, it is common for the Landlord or Agent to ask for a guarantor, particularly when a Tenant has a low credit score or considered a risk category such as students or benefit claimants. The harsh reality is the current economic climate means every Tenant is a risk.
Where a guarantor enters into an agreement they normally agree to meet the full obligations under the Tenancy Agreement on the Tenant’s behalf.
This may include rent arrears, damage to the property, or other liabilities and obligations arising from the Tenant’s failure to comply with the lease covenants. The guarantor is contractually bound to accept these legal liabilities of the Tenant and will be sued if they don’t comply.
As with most types of legal action, claims against guarantors have been on the increase in recent years, so the role of guarantor is quite an onerous one and not to be entered into lightly.
The guarantor would usually need to be a home owner with steady long-term employment if they are to satisfy the requirements of a good credit score, to become a guarantor.
Parents of young people or students are often asked to guarantee their children’s rent. This, hopefully, is less risky for the parent, as they know that their child can be trusted.
However, parents need to be cautious here because joint residential tenancies for students or groups usually carry joint and several liability – this means that the parent is, in effect, guaranteeing all the other residents as well and not just their child!
The guarantor’s application form is similar to the tenancy application. Credit searches and references will be checked and all of the following:
The individual’s identity
The property to be let
Guarantor’s personal details
Legal history and any CCJ’s
Accountants, solicitors, character referee
Bank and trade references for businesses
Declaration allowing credit search & signature