What is a guarantor? A guide for landlords

Tenants reviewing a tenancy agreement

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.

What is the guarantor meaning?

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.

Who can be a guarantor?

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:

  • identity and personal details
  • the property they’re agreeing to be guarantor for
  • legal history
  • employment history
  • residency information
  • references (a character reference from an accountant or lawyer)
  • bank reference
  • agreement that you can do a credit search, plus signature

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.

What goes in the guarantor agreement?

The guarantor’s agreement is with the landlord (and separate to the assured shorthold tenancy agreement). It includes:

  • the date of the agreement
  • the lease term the agreement applies to (and how the guarantor’s obligations end)
  • the names of the guarantor and the landlord (and their signatures)
  • the property details
  • the tenant’s name

The guarantor agreement needs to be clear about the guarantor’s responsibilities and obligations. For example:

  • is the guarantor only liable for unpaid rent, or do their obligations extend to situations like property damage?
  • in shared accommodation, does one guarantor cover the whole tenancy, or are there separate guarantors for each share of the rent?
  • does the guarantor agreement last only until the end of the initial period, or does it extend to future terms (or a ‘rolling’ tenancy)?
  • if the guarantor agreement is open-ended, it can only legally end by a service of a valid notice to quit by the tenant, or by mutual surrender of the tenancy between the landlord and tenant, or a possession order from the court
  • will the guarantor also be liable for changes to the tenancy agreement, like rent increases?
  • is the landlord required to minimise the guarantor’s losses, for example by putting the property up for rent as soon as possible if the tenant leaves during the lease term?

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.

Shifting demand for guarantors

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.

What’s a guarantor mortgage?

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.

Landlord guides and resources

Have you ever asked a tenant for a guarantor? Let us know your experiences in the comments below.

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Photograph: alfa27/stock.adobe.com

Sam Bromley

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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