One of the things you’ll worry about when you take on new tenants is whether they’ll pay the rent on time, every time. Even the most reliable tenants can hit a rough patch, or you might want to help a young couple starting out while making sure your generosity doesn’t hit you in the pocket.
You can give yourself – and your tenants – some peace of mind by asking them to provide a guarantor for their tenancy.
What is a guarantor?
A guarantor is someone who isn’t a tenant and who agrees to cover any shortfalls in the rent if your tenants can’t make one of more payments. Your guarantor can also cover the cost of any damage caused by the tenants if they can’t pay for it themselves.
In most cases, a guarantor is a parent, close friend or relative of one or more of the tenants, but it can also be an employer or business associate. As long as the person is willing and able to step in if the tenants aren’t able to pay their rent or a big repair bill, they can act as guarantor.
You should gather references and carry out the same credit checks as you do with your tenants to make sure they can fulfil their guarantee. The guarantor should also be a UK resident, if possible, as it’s harder to recover debts from people living overseas. It’s also important for the guarantor to hold significant assets, such as property, so that you have something to claim against if things go badly wrong.
Your guarantor will need to sign an agreement
This agreement can be the tenancy agreement or a formal guarantor agreement and this should be signed before the tenancy agreement or it may not be enforceable. The document should include:
– The guarantor’s full name
– The tenant’s name
– The dates of the tenancy
– The property details, and
– How much they can guarantee, such as rent only or rent and damages up to a specified amount.
It’s also important to have another agreement to confirm that the guarantor will carry on acting as guarantor if the tenancy is renewed, the rent amount changes or if one of the other tenants move out.
Arrange to meet the guarantor
You should meet – either in person or over video – the guarantor to review the paperwork and to make sure they understand what might be expected of them. You also need to take their contact details so you can get hold of them if necessary.
When can you claim money from the guarantor?
Each agreement will have its own terms that all parties consent to, but in most cases, you can contact the guarantor as soon as your tenant misses a payment. Of course, it may be easier for everyone to give the tenants some time to make up their shortfall and only contact the guarantor if this doesn’t happen within this timeframe.
