Should I Get a Tenant Guarantor
Rebecca Brough of Fidler and Pepper Solicitors asks whether landlords need a tenant guarantor, and explains how they work.
The advantages of a tenant guarantor
Many landlords are now considering whether to have a guarantor to a tenancy agreement
– the reasons for this may be that they don’t want to take a deposit, or they are renting to young people who may not have a credit history, making it difficult vetting tenants.
The advantage of having a guarantor means that there is another person who can stand in the place of the tenant in respect of any breaches the tenant has caused, such as rent arrears or damage to the property. It can also act as a deterrent – not many tenants want to have to explain to their guarantor why they have breached the terms of the tenancy.
If you are considering having a guarantor, you need to ensure that you get the right guarantor, and also that you get the procedure correct.
Checking the guarantor
Firstly, when considering a guarantor, you need to ensure that the guarantor can stand in the place of the tenant in respect of the liabilities. It is no good having someone who is has no money or assets – you might as well not bother. When taking on a guarantor you need to credit check them, just as you would the tenant. I would advise ensuring that the guarantor is working, and/or, has some assets.
Once you have decided on your guarantor you then need to make sure you follow the correct procedure. Firstly, you need a Deed of Guarantee drawing up. This should clearly sets out the guarantor’s liabilities. You also need to ensure, that the guarantor has had the opportunity to read through the tenancy agreement. I would advise that the tenancy agreement is attached to the Deed of Guarantee, as then there can be no doubt. The guarantor needs to have the opportunity to take the documents away, and read through them, and if necessary, obtain independent legal advice. They should not feel under any pressure to sign the agreement.
Although the Deed of Guarantee Form should state that the guarantor is responsible for the full period of the tenancy, many guarantors look at the fixed period on the tenancy agreement, and think that they are only responsible for the fixed term. It is therefore worth pointing out to them, that they are responsible from the date the tenant moves in, until the date they move out, whether that be in 6 months or a couple of years down the line.
I would advise keeping a note of the date you give the guarantor the documents, and any conversation you had with them. This information may prove crucial at a later date.
The reason you need to give your guarantor the opportunity to take the Deed and Agreement away and get advice if they need it; is if they were to bring a claim against you, they cannot argue that they felt pressured into entering into the agreement. There have been cases in the Courts that have found that the guarantor was knowingly mislead into signing the Deed of Guarantee, and didn’t realise what they were signing; or felt under pressure to sign the document, so the tenant could have the keys.
In one case recently, I was consulted by a landlord who was trying to pursue the guarantor. The guarantor’s defence was that they attended the property on the day the tenant was moving in and met the letting agent, who handed over all the documents for signing. In this case, the guarantor argued that they did not have the chance to read the document and get proper legal advice, and as everyone was ready to move in, they felt they had no option, but to sign. In the end the guarantor didn’t have any assets, so the landlord did not continue with the claim. Had we gone before the Judge, my view is that the Judge would have found that the guarantor was under pressure to sign the Deed, and would of ordered in favour of the guarantor.
Claiming against the guarantor
Should your tenant unfortunately breach the tenancy agreement it is often worth contacting the guarantor and letting them know what the position is. You may find that the guarantor will have a word with the tenant, and before you know it your tenant is behaving again. If the situation isn’t resolved; you should first concentrate on what action you need to take against the tenant to end the tenancy.
Once you have secured possession of the rental property you can then assess your losses, whether this is rent arrears, damage to the property, or both. When you know what your losses are you can then consider bringing a claim against the guarantor. The first course of action after this would be to write to the guarantor setting out the losses. Hopefully, the guarantor will pay straight off. If the guarantor doesn’t pay the money owed, you will then need to bring a claim against them in the Courts. In most cases your claim will be for less than £5,000, so any claim will be in the Small Claims Court. You will need to include a copy of the tenancy agreement and the Deed of Guarantor with the Court papers.
These will then be served on the guarantor. If the guarantor admits the claim you will get judgment for the sum you are claiming. If the guarantor defends the claim they have to set out their reasons. Should they claim that they didn’t understand what they were signing, this is where you can show the Court that you gave the guarantor plenty of time to read the documents before signing them and advised them to seek legal advice. If the Court find that the guarantor had plenty of time to read the documents and seek advice; the only other defence open to the guarantor is that they don’t owe the amount you are claiming. It is for you to then prove the losses to the Court as you would in any other claim. Should the Court make a Judgment in your favour the guarantor will be given a time to pay the sum owed; if the guarantor doesn’t pay the money you can then take steps to enforce the judgment. Enforcement can be by an Attachment of Earnings Order, a Charge over their property or the Bailiff seizing possessions to sell.
For more general advice on tenant guarantors:
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