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As a landlord, there may be times when you want to ask your tenant to name a guarantor. This helps make sure that the rent gets paid even when tenants are in financial difficulty.
It’s quite common to ask for a guarantor. The tenant may not have regular work (if they’re a student, for example).
Or, they may not have rented before and therefore have no references.
In those situations, a guarantor helps them to secure the tenancy and keep it going if they fall into rent arrears.
Other checks on a potential tenant can also reveal that they have a low credit score.
There are many reasons why someone might have a low credit score and it doesn’t always mean the tenant won’t be able to keep up payments.
But as these checks are designed to give you peace of mind that the tenant is reliable, asking for a guarantor can bring you extra security.
In a financial agreement, a guarantor is someone who can make repayments when the person who took out the contract is no longer able to.
When it comes to a rent guarantor, this is someone who can pay rent when the tenant can’t.
The guarantor will usually be liable for other payments too, like property damage.
They will also need to meet the tenant’s other obligations and responsibilities when things go wrong.
Guarantors give landlords extra security, but you need to check that they would actually be able to pay.
Guarantors should be in stable long-term employment and UK homeowners themselves.
As there’s a high level of trust involved, the guarantor will often be a close relative. For instance, students usually ask a parent to be their guarantor.
From a landlord’s perspective, you need to check the guarantor in the same way you check tenants. That means credit searches and referencing, as well as asking for these on the application form:
You should also draw up a proper guarantor agreement. As there’s no standard or statutory guarantor agreement, it’s important that the wording is right for all parties.
The guarantor’s agreement is with the landlord (and separate to the assured shorthold tenancy agreement). It includes:
The guarantor agreement needs to be clear about the guarantor’s responsibilities and obligations. For example:
The guarantor agreement shouldn’t have terms that create a ‘significant imbalance’ between the parties involved, as the courts may view that as unfair.
If a guarantor thinks a term is unfair and they decide to take the landlord to court, the court will decide whether the guarantor has to pay.
Landlords are increasingly asking for guarantors from higher earners, according to research from lettings platform Goodlord.
Analysis of more than 220,000 tenancies taken out between January 2020 and June 2023 found a 92 per cent rise in guarantor requests for tenants earning between £50,000 and £74,999.
The number of tenants earning £25,000 to £50,000 being asked to provide a guarantor has risen by 58 per cent since 2020. Now 5.84 per cent of tenants in this income bracket are being asked for a guarantor when taking out a new tenancy.
Higher mortgage rates for landlords and the cost of living pressures faced by many tenants is likely causing the rise in requests for guarantors.
Landlords are looking for added security in an unpredictable economic climate. That's why it’s also a good idea to consider rent guarantee insurance in case your tenants default on rent payments.
It’s best to get dedicated professional advice when drawing up a guarantor agreement or an assured shorthold tenancy contract.
This is something different to being a guarantor for rent, but the principle is the same.
If someone is having trouble securing a mortgage, perhaps because they’re a first-time buyer or they don’t have a strong credit history, they can apply for a guarantor mortgage.
If that person falls into arrears, the guarantor is responsible for the mortgage repayments.
Have you ever asked a tenant for a guarantor? Let us know your experiences in the comments below.
Sam has more than 10 years of experience in writing for financial services. He specialises in illuminating complicated topics, from IR35 to ISAs, and identifying emerging trends that audiences want to know about. Sam spent five years at Simply Business, where he was Senior Copywriter.
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