Rent Guarantor: What is, Who can be, When you might need one?
In the UK, when you want to rent a property, it’s common for landlords to ask for a rent guarantor. In this guide provided by our student letting agency, we will explain this concept step by step so you will know in detail how it works.
What is a Rent Guarantor
A rent guarantor is a person that the landlord may require when a property is rented. This is common if there are problems with rent payments. However, if a rent guarantor is not available, the tenant will be asked to pay some or the entire rent for the tenancy upfront.
On the contrary, a rent guarantor is an assurance the landlord can refer to in case the renter falls behind with the monthly payments. In other words, a guarantor is someone (typically a parent or a family member) who agrees to pay the tenant’s debts when he/she fails to do so.
The landlord has the legal right to refer to the rent guarantor and if this one does not pay, the property owner can take them to court. Normally, the landlord will want to double-check the rent guarantor’s reliability by carrying out a credit check. Another very important and legally binding aspect is that the guarantee agreement must be in writing.
Who can be a Rent Guarantor
In the majority of cases, the rent guarantor is a parent, a brother, a sister, an aunt, or even a grandparent. In reality, almost anyone can be a guarantor as long as they meet the requirements set by the lenders. When students are to be assigned a guarantor, this would normally be a parent or a family member because they are most likely to take the risk and accept the substantial financial commitment that being a rent guarantor implies.
In any case, the decision to become a rent guarantor should be based on trustworthiness and willingness/ability to cover for repayments. To be a rent guarantor one needs to be over 21 years of age, have a good credit history, and, of course, financial stability.
In addition, the ideal rent guarantor should be in the same country where the rental agreement is signed because lenders will have easier access to financial and credit history. If a guarantor lives in the country, it also means that potential legal complications will be dealt with in a smoother manner.
This could be more complicated, should the guarantor live in another country. Becoming a rent guarantor comes with some serious responsibilities: it is a role that one has to take seriously once every obligation is fully understood.
If someone decides to be a rent guarantor for a tenant, it is likely their relationship is based on trust or a family bond. Most of the time, the guarantor won’t have to take action, yet they will have to be prepared for it, should it be needed. Likewise, lenders should also be aware of all the responsibilities and obligations guarantors have agreed on when signing the contract.
When you might need a Rent Guarantor
A rent guarantor is needed in several cases. For example, when a person is young or comes from another country with no credit history, someone who just started working, a tenant with a low salary or a low credit score.
Before one decides to become a rent guarantor, it is important to understand why it is needed and should be close enough to the person in need in order to discuss openly finances. Additionally, a person who accepts to be a guarantor should think about the reasons behind such a request, how responsible the tenant is, whether he/she is able to repay in case the tenant does not comply with the monthly obligations.
Another aspect to be considered, often ignored, is to what extent can the relationship between the two parties be affected. There are also circumstances in which someone does not have access to a rent guarantor. One of them is the guarantor’s inability to meet the criteria of the property owner or lender.
Another potential situation is the impossibility to find a person who is willing to be the rent guarantor. A person (usually a student) might also be unwilling to pay a large amount of money in advance.
Is a Rent Guarantor required for student accommodation?
While student accommodation used to be the perfect (and cheap) place to live in for a set period of time, in the past few decades this trade has changed. Nowadays, developers are building luxury student blocks in the proximity of universities, and to most private landlords student accommodation has become a lucrative market.
There surely are plenty of opportunities when it comes to student housing, yet the cost for renting is increasing rapidly, way above the normal loan allowance an undergraduate is entitled to. For this reason, a rent guarantor is often required when a student leaves campus accommodation to move out to a cheaper solution.
Should the student have problems paying the rent, landlords will pursue the guarantor for the unpaid sum. It is important for parents acting as guarantors to check the tenancy thoroughly in order to avoid unexpected consequences.
In other words, rent guarantors should read the contract in its entirety, pay attention to its clauses, and every important piece of information. The paperwork should be clear, there shouldn’t be hidden costs. One of the most common scams is a contract that does not include a deposit, a situation that might leave both tenants and guarantor liable for uncapped costs when it’s time to leave the property.
Another reason why students’ guarantors should be extra careful is that most of the time, undergraduates are first time renters, a situation that makes them more vulnerable. Having less experience exposes students to more scams and ruthless property owners. What’s most important is to reread and double-check any document that requires a signature: to the rent guarantor, every single aspect from the tenancy agreement has to be clear and, when this isn’t the case, questions should be asked.
When the Rent Guarantor can be asked to pay
Normally, the rent guarantor will be asked to pay whenever the tenant stops or cannot afford to pay the rent him/herself. However, the guarantor might have to take care of extra charges, depending on what is stated in the rental agreement.
In many cases, a housing contract includes costs related to other conditions under the tenancy, such as damages caused to the property. When an agreement extends to other conditions of the tenancy, it is very important that the guarantor checks the contract.
This is the only way they can see what are the exact obligations they are guaranteeing for.
What happens if a rent guarantor refuses to pay?
If a rent guarantor refuses to pay, different possible scenarios have to be considered. When the guarantor cannot afford to make the repayments, the property owner will carry out an investigation into the reason why this is the case.
The landlord will then try to find a possible solution together with the rent guarantor. Unless the guarantor’s circumstances change drastically (unemployment, impairing illness, etc.) it is unlikely that they cannot afford to pay the loan.
If this is the case, the rent guarantor is refusing to comply with their obligation. Refusal to pay means breaching the contract between the property owner and the rent guarantor, thus exposing the latter to legal consequences.
However, before legal action is carried out, the lender will try to make contact with the guarantor (normally by email or phone). If this one refuses to make the repayment when it’s due, then the property owner can begin to take legal action.
The next step will typically be a warning letter of pre-court action sent to the guarantor. If repayment is not made within 14 days after the warning letter, court proceedings will begin. The lender can then begin a court order which will enable them to retrieve the money owed by the rent guarantor.
What happens if a guarantor can’t pay the rent?
When the guarantor cannot pay the rent, it means something prevents them from doing so. Because it is not a voluntary decision, the lender and guarantor will try to find a suitable solution. It is typical for both parties to sign an agreement after the guarantor’s financial situation is thoroughly investigated by the property owner.
The reason behind this investigation is to ensure the rent guarantor is able to afford to make repayments in case the tenant fails to do so. Only then, the loan is approved. There are four aspects the lender will normally look at before the loan is effective: the rent guarantor’s credit rating, the employment status, the income, and the homeowner status.
These checks and such strict criteria will help reduce the risk of guarantors unable to make repayments.