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The Ins & Outs Of Guarantors

20/04/18 by Herwald Sales & Lettings

Securing a brilliant tenant requires more than goodwill and a strong background check. On occasion, there’s likely to be need for a guarantor i.e. someone who can cover any damage, misuse and/or missed rent payments, should the tenant themselves incur costs they can’t afford.

This isn’t a cut-and-dry affair, however. It’s okay to be uncertain as to when a guarantor is required, and when they aren’t. So today, we’re going to break down the criteria for these agreements from a landlord’s perspective. It’s our crash course in guarantor etiquette: when it’s desirable, how to go about it, and where those lines overlap…

Who’s suitable for guarantor arrangements?

As a rule, you’ll want extra protection if one or more of the following is true of your tenant:

  • They are a student, or under 21
  • The rent is more than a third of their income
  • Credit checks have flagged up a low rating
  • They have only spent 6 months in their current property or position of employment

Anything outside of such guidelines is likely to be viewed with consternation by the tenant. Not asking for a guarantor puts faith in their independence and earning ability. Unless there’s a good reason to doubt someone, we suggest avoiding a guarantor scheme.

What the guarantor has to know

Certain yardsticks apply to the contact they put forward too. A guarantor is, ideally, a property owner. They must be able to cover the cost of structural issues, bills and cleaning charges that are the direct result of what the tenant has done, falling outside of their contracted stipulations of care for the home. Often, the guarantor is a relative – usually a parent – of the resident. But if they aren’t, greater scrutiny should be applied, gathering evidence to prove their eligibility.

Before they sign, the guarantor must read and agree to the tenancy contract. If they are covering a student, they may not be aware that they’re typically held responsible for all tenants – not just their own. Student housing stipulates that every guarantor in the house-share contributes to payment, if it’s needed. Make sure they know exactly what they’re getting into before signing.

Make it part of the contract

Details such as these are laid into the fabric of your tenancy agreement. Don’t bury it in the small-print; have a clear, separate sheet for the guarantor conditions, as well as a place for the parent/guardian to note their signature.

It might be best to draw up two forms of tenancy contracts – one that asks for a guarantor, and another that doesn’t. That way, you can apply them to various occupants throughout your portfolio. Detail the name of the property, the rent per month, space for their credit search acquiescence, and a box for the guarantor’s personal address and income stream.

It’s also wise to protect yourself against a dispute. Guarantors may think that, in the event of a payment request, you are being unreasonable. Laying out the specifics in the agreement will prevent legal battles. Photographic evidence of a ‘before’ and ‘after’ status of your furnishing, utilities or structure will support your request.

Summermere are always happy to advise on the guarantor debate. We let properties across the North West, and we’re used to helping landlord/tenant relationships get off to a great start. To find out more, contact us today; we’re serious about making these tricky elements of managing a portfolio much easier.

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