FREE Guarantor Forms
Landlords who are concerned over tenants defaulting on their rents should consider requiring their tenants to obtain a guarantor before letting their property.
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The need for a guarantor has never been more important than times like these where tenant unemployment is a real risk to landlords. This is particularly true for younger tenants who are often the first to be laid off.
Guarantor forms have often been used extensively by student landlords, where because of the lack of a credit history, young tenants tended to fail any credit checks because of a low credit score.
How tenant guarantor forms work
A landlord gets a tenant to find an individual to act as a financial guarantor in case they fail to pay the rent. By doing this, even if the tenant defaults on the rent, the landlord is able to seek payment from the guarantor, who should be able to meet the tenant’s financial liabilities.
It is therefore essential that the tenants guarantor is also credit checked and that they pass the vetting process and are able to finance any missed rent payments or other rental charges that may need to be laid against the tenant.
Many landlords insist that guarantors should be homeowners, because up until the recent house price falls it was assumed that if court action was required, that this could be enforced against any collateral contained in the guarantor’s property.
Our FREE guarantor forms
One of Property Hawk’s regular users, Terry Samuels a student landlord from Cheltenham has produced a set of tenant guarantor forms and deeds which he has been using successfully in his letting business for a number of years. These forms are now available to download for FREE from Property Hawk’s Property Management software.
The forms are:
1. Deed of Guarantee
2. The tenancy agreement
3. Guarantor Letter
4. The Guarantor Application
To use them landlords just need to add a property and a tenancy in the Property Management software. This will capture all the information required to create the tenancy agreement and Deed of Guarantee.
The other two forms are available as pdfs within the Standard Forms section.
Commenting on the use of the guarantor forms Terry advises landlords that:
“I send two copies of each of the above forms. One the prospective guarantor keeps and the other they return.
The guarantor letter is by way of an introduction to the process.
Terry advises that: “It’s essential that they return a signed and dated copy of the proposed tenancy agreement, so they cannot claim they haven’t seen it. Then there is the Deed of Guarantee – this must be a Deed, which is signed, dated and witnessed to have the force of law behind it.”
One thing that landlords must remember is to credit check thoroughly the guarantor. There is no point having the comfort of a guarantor if they are no more credit worthy than the tenant. In this scenario you would be left with two individuals to pursue through the courts who at the end of the process will end up with a County Court Judgment (CCJ) against them, both will probably paying no more than a couple quid a month.
What a landlord needs is a good, middle class, professional guarantor who would be appalled at the thought of having a CCJ on their credit record. ‘What would the neighbours think!’
The other advantage of guarantor forms
Some landlords, such as Terry Samuels, who let to student tenants use guarantor forms as a method of avoiding having to take a tenancy deposit and comply with the onerous Tenancy Deposit Scheme (TDS).
Instead Terry charges an administration fee to set up the tenancy, in much the same way as a letting agent would. With the security of a legally executed deed should a landlord need to make a charge for any damage to their buy-to-let property they can claim against the guarantor rather than having to try and deduct it from a tenancy deposit.