Everything a landlord needs to know about guarantors
A growing portion of the rental market is young, professional tenants. They are well educated and generally have great earnings with high potential for a long and lucrative career. However, many have never rented before, nor built up a good credit score. This may be their first move away from home. In such cases, it’s best to seek a guarantor.
In this article, you’ll learn what you need to know about tenant guarantors – and why ‘Big Daddy’ is usually the best guarantor to have.
What is a guarantor?
A guarantor is your insurance against a tenant defaulting on their rent or refusing to pay for any damage, expenses, or losses caused. You’ll find that if a tenant needs a guarantor, it will usually be a close relative or, sometimes, a friend.
What are guarantor’s responsibilities?
The guarantor will be bound by contract to make good on all that he or she is guaranteeing – agreeing to meet the full obligations as stated in the tenancy agreement. This has to be stated in the guarantor agreement, which must be signed and witnessed. If the tenant can’t (or won’t) pay what they owe, then the guarantor can be sued.
What qualities should you look for in a guarantor?
When you need a guarantor for your tenant, the guarantor must be over 18. In addition, you should carry out all the background checks that you carry out on the tenant. For example:
- Make sure that the proposed guarantor is of good character
- Ensure that they have a good credit history
- Check that they have a job and that they are in steady employment
Ideally, the guarantor should also be a homeowner. This provides another layer of protection, with the guarantor agreement stating that the guarantor’s home could be at risk if the tenant defaults and the guarantor cannot pay what is owed.
What type of tenants may need a guarantor?
During the tenant vetting process, it may be that some checks throw up a concern. When vetting tenants, we always select the very best possible. Even so, on the odd occasion we may need to ask for a guarantor. This is especially the case if the tenant has a low credit score. While we’ve highlighted that young professionals may fall into this category, typically such tenants might include:
- Self-employed people
- Those in low-paid jobs
- People with a sketchy employment history
While background checks are essential, it is important to not simply rule out tenants because of them. There may be reasons for a low credit score that can be explained, and then financial liabilities are covered by the guarantor.
How do you sign up a guarantor for your tenant?
It is the tenant’s responsibility to find a guarantor. It is yours to make certain that the guarantor understands their responsibilities, to run background checks on them, and to also have them sign the legal agreement needed to set up the guarantee.
You will need to meet the guarantor in person and confirm their identity. Assuming they agree to become the tenant’s guarantor, you will then need them to sign a Deed of Agreement – this makes the agreement enforceable in law. You should also go through the tenancy agreement with the guarantor, to make sure they understand the tenant’s obligations.
Why ‘Big Daddy’ is usually the very best guarantor
Those of you who are old enough will remember Big Daddy as one of the UK’s most popular wrestlers in the 1970s – often in the ring with Giant Haystacks. You might think that a pro wrestler, with arms the size of elephant legs and every fighting trick in his toolbox, would be someone you don’t want to deal with. Take it from us, this is often the type of person that makes the best guarantor.
He’s not going to take kindly to being rolled over by your tenant. The chances are he will chase the tenant for you if payments are late – he doesn’t want his good name and credit score to be damaged. And if the guarantor also happens to be the tenant’s father, then he’s also going to be keen to ensure that his son or daughter gets back on track with the tenancy.
And, don’t forget that most kids – even when they are in their 20s or older – don’t want their parents to think they cannot handle their own finances. Therefore, your tenant is more likely to stay on track with their rent payments and other obligations.
If a tenant needs a guarantor, our buy-to-let landlord clients can rest assured that we take all the steps necessary to make sure that the guarantor is like a real insurance policy. To learn more about our processes and practices, and how we help to make your property investment journey effortless, contact one of our team today at +44 0 1522 503 717.
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