Renting out a property can be a risky business. Tenants may fail to pay rent, damage your property, or even disappear without notice. That’s where a guarantor comes in. A guarantor is someone who agrees to pay the rent or cover any damages in case the tenant defaults on their obligations. In this guide, we’ll explain everything you need to know about guarantors and how to choose the right one.

Understanding Guarantors

A guarantor is a third party who agrees to assume financial responsibility for a tenant in case they can’t fulfil their obligations. The guarantor acts as a safety net for the landlord and provides an extra layer of security. Guarantors are common in situations where the tenant is a student, has no rental history, or has a low income that is not enough to pass referencing. Having a guarantor can give landlords peace of mind knowing that they have someone to turn to if something goes wrong.

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Who can be a Guarantor?

Individuals and companies can act as guarantors. Individuals are often family members or close friends of the tenant, while companies can be banks, insurance companies, or other organisations. When choosing a guarantor, it’s important to ensure that they meet the eligibility criteria. For individuals, this includes being over 18 years old, having a good credit score, and having a steady income. For companies, they must have a good financial standing and be willing to sign a guarantee agreement.

There are pros and cons to choosing an individual or a company as a guarantor. An individual guarantor may have a personal relationship with the tenant, making them more invested in ensuring that they fulfil their obligations. However, they may also have limited financial resources. A company, on the other hand, may have more financial stability but may not be as invested in the tenant’s well-being.

It’s also crucial to perform a reference check on the guarantor to ensure that they meet the affordability criteria since they would need to be able to cover either all or a partial amount of the rent. This should include checking their credit history, employment status, and any legal or financial issues they may have. Once this check has been completed, they should also sign a Deed of Guarantee or a similar legal document in order to ensure they are legally liable for covering the rent. 

What are the Responsibilities of a Guarantor?

The responsibilities of a guarantor include paying the rent, covering any damages caused by the tenant, and ensuring that the tenant fulfils their obligations under the tenancy agreement. The guarantor becomes liable when the tenant fails to pay rent or causes damage to the property. It’s essential to have a written agreement that clearly outlines the guarantor’s obligations and when they become liable. This agreement should also specify the duration of the guarantee and any other terms and conditions.

It’s important to remember that having a guarantor is not a substitute for proper screening and due diligence. Always conduct thorough checks on your tenants before signing any agreements, and make sure that they are reliable and trustworthy.

In summary, guarantors can be a valuable tool for landlords, providing an extra layer of security and protection against tenant defaults. By understanding the role of a guarantor, choosing the right one, and maintaining clear communication, landlords can maximise the benefits of this arrangement and achieve long-term success in their rental business. Remember to always conduct proper screening and due diligence when choosing tenants and guarantors, and to establish clear terms and conditions in any agreements. With the right approach and mindset, having a guarantor can be a win-win situation for all parties involved.

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