When letting out your properties, you are likely to receive offers from tenants that don’t pass the affordability criteria during the referencing checks, leaving them with two options. Either a Guarantor or an upfront payment of 6 months’ rent. This is a common dilemma that many people face in the real estate market. Both options have their pros and cons, and it’s essential to understand them to make an informed decision.

This article will explore the advantages and disadvantages of both options, their legal implications, and answer some frequently asked questions.

Is it Better to Ask for 6 Months Rent Upfront or a Guarantor?

When renting out a property, landlords have to safeguard their interests while ensuring that they are compliant with the law. One way to mitigate risks is by asking tenants for six months’ rent upfront or a guarantor. But, which one is better? Let’s compare.

Free Landlord Resources

Asking for 6 Months Rent Upfront

Pros:

• Steady Income: Landlords receive six months of rent upfront, ensuring a stable income stream for a long period.
• Minimal Tenant Screening: With six months rent upfront, landlords don’t have to conduct a rigorous screening process to assess tenants’ ability to pay rent.
• Avoid Rent Arrears: Tenants paying six months rent upfront are less likely to fall into rent arrears, ensuring financial stability for the landlord.

Cons:

• Tenant Affordability: Six months’ rent upfront can be a significant financial burden for many tenants, and it may deter them from renting the property.
• Legal Issues: In some jurisdictions, asking for six months rent upfront may not be legal. Before considering this option, landlords should seek legal advice.
• Property Maintenance: With six months rent upfront, tenants may feel less inclined to report maintenance issues as they feel they have already paid for their stay.

Asking for a Guarantor

Pros:

• Tenant Affordability: Asking for a guarantor is less of a financial burden on tenants as they don’t have to pay a significant amount upfront.
• Tenant Screening: By asking for a guarantor, landlords can conduct a thorough screening process to ensure that the tenant is trustworthy and can pay rent on time.
• Legal Compliance: Asking for a guarantor is legal in most jurisdictions, making it a safer option for landlords.

Cons:

• Limited Guarantee: Guarantors are not always reliable, and they may be unable or unwilling to pay the rent if the tenant defaults.
• Time-Consuming: Finding a guarantor can be a time-consuming process, delaying the tenant’s move-in date.
• Limited Coverage: A guarantor’s coverage is limited to the rent amount, and any additional costs or damages are not covered.

Legal Implications of Asking for 6 Months Rent Upfront or a Guarantor

Landlords should be aware of the legal implications of asking for six months rent upfront or a guarantor. Depending on the jurisdiction, laws may differ, and landlords should consult with legal counsel before making any decisions.

• Rent Act 1977: In the UK, the Rent Act 1977 prohibits landlords from requiring more than two months rent upfront, making asking for six months rent illegal.
• Consumer Credit Act 1974: In the UK, if the tenant is required to provide a guarantor, the landlord must disclose certain information, such as the guarantor’s liability and the tenant’s right to review the agreement before signing.
• In some jurisdictions, landlords are required to provide tenants with a written statement explaining the terms and conditions of the tenancy agreement, including the amount of rent, any required deposits, and the duration of the tenancy.

Frequently Asked Questions

Q: Can a landlord ask for both six months rent upfront and a guarantor?

A: It depends on the jurisdiction and the tenancy agreement. In some cases, landlords may be able to ask for both, but it’s important to seek legal advice before doing so.

Q: What happens if the tenant defaults on rent payments?

A: If the tenant defaults on rent payments, landlords can take legal action to recover the rent owed. If the tenant has a guarantor, landlords can pursue the guarantor for the rent owed.

Q: Can landlords change their mind and ask for six months rent upfront or a guarantor after signing the tenancy agreement?

A: No, landlords cannot change the terms of the tenancy agreement without the tenant’s consent.

Q: What happens if the guarantor defaults on rent payments?

A: If the guarantor defaults on rent payments, landlords can take legal action to recover the rent owed.

In conclusion, asking for six months rent upfront or a guarantor has its advantages and disadvantages. Landlords must carefully weigh their options and consider the legal implications before making a decision. Tenants should also be aware of their rights and consult with legal counsel if necessary. Ultimately, the decision to ask for six months rent upfront or a guarantor will depend on individual circumstances and needs.

Free Landlord Resources