What are the responsibilities of a guarantor for tenancy?

Sometimes, as a landlord, you’ll come across a tenant who looks great on paper but just falls short on a credit score, and you still feel as though it’s worth taking a shot at them. Having a guarantor for a tenancy agreement is the best solution to this predicament and will allow you to move forward with the tenancy agreement. But what are the responsibilities of a guarantor for a tenancy? 

Having a good understanding of the responsibilities of a guarantor is the best way to protect your investment because it’s not only about having a secondary source of rental income, but it is also about creating a financial safety net for yourself. Here, we’ll go through the legalities and financial liabilities of having a guarantor, including why the Deed of Guarantee will be one of the most important documents you’ll sign. 

Defining the responsibilities of a guarantor for a tenancy

The basic premise of having a guarantor is having a third party who legally takes on the tenant’s role in paying rent if they can no longer do so. Looking at the responsibilities of a guarantor for your tenancy, they include having a legally binding commitment to meet the terms of the tenancy agreement. 

So, from your perspective as a landlord, you’ll have a backup plan as a form of insurance. This includes damages caused by the tenant, too. This agreement is there to ensure that you’re never out of pocket due to the tenant’s inability to pay when they need to. 

The Deed of Guarantee

The biggest mistake you can make as a landlord is to assume that the guarantor’s signature is enough to cover you. You’ll need to implement the guarantee as a deed for it to be enforceable in court. 

Why a deed matters

For a contract to be binding, it needs to be beneficial for both parties involved, and because the responsibilities of a guarantor for a tenancy don’t require that they live in the property, they don’t receive a direct benefit. So, implementing the agreement as a Deed of Guarantee means that this requirement is bypassed. 

Characteristics of a watertight deed

Here’s what makes a deed as efficient as possible: 

• The agreement should be in writing.
• Clear language needs to be used that explicitly states that the guarantor is responsible for all reasonable costs and losses incurred.
• The deed will need to be signed, and this needs to be witnessed by an independent third party. 
• The guarantor will also need to be given a copy of the tenancy agreement before signing the deed so that they can’t claim that they were unaware of what they were signing for.

The main responsibilities of a guarantor for a tenancy

Looking at the responsibilities of a guarantor for a tenancy agreement, there are three main categories to consider. Let’s take a look at these in more detail. 

1. Unpaid rent and arrears

The main responsibility of a guarantor for a tenancy is to cover the rent and any rent arrears should the tenant lose their job or be unable to continue rent payments. As the landlord, you’ll have the right to demand the full rent amount from the guarantor. 

You are not legally required to exhaust all options first against the tenant, and depending on how the deed is written, you’ll be able to communicate with the guarantor as soon as the rent is late. 

2. Property damage

Another responsibility of a guarantor when it comes to tenancies is the physical state of the rental property. Naturally, the first step will be to refer to the security deposit when there is any damage caused to the property; however, if there is severe damage, the deposit may not cover the full extent of the damage. 

So, the guarantor will need to cover these repairs so that the property can be returned to its original state. This way, you won’t need to worry about any renovation costs. 

3. Legal and eviction costs

One of the most overlooked responsibilities of a guarantor is the cost of needing to seek possession of the rental property. If you are forced to evict a tenant, the legal fees, court costs, and bailiff fees can rack up and become expensive. So, having a robust guarantee agreement means that the guarantor will be liable for these costs. This will protect your finances, even if the eviction process becomes messy. 

Joint and Several Liability

Usually, in shared housing, tenants will sign a ‘joint and several’ agreement, which means that every tenant will be collectively responsible for the whole rent. So, when it comes to the responsibilities of a guarantor for a tenancy, unless specifically limited by a clause in the deed, they might inadvertently become responsible for all tenants. As a result of this, they would need to cover the rent of all tenants. It is important to state this clearly in the agreement, though, and to be as transparent as possible with this.

Vetting the guarantor

You’ll need to vet a guarantor because their responsibilities for a tenancy are so significant. Essentially, having a guarantor who is unable to pay when needed is useless. Here’s how you can vet a guarantor to make sure they are exactly what you need as a landlord. 

The golden standard guarantor

These are some of the things you should look out for when choosing a high-quality guarantor:

1. Homeowner status: Someone who owns a home is typically very settled, and they also have a tangible asset that can be secured against if needed. 
2. UK residency: For logistical purposes, it is always best to choose a guarantor who is based in the UK. 
3. Income requirements: usually, it is best practice to choose a guarantor who has a monthly income of 3-4 times the rental price. This ensures that they can cover their own mortgage, as well as the rent if need be.

How long does the responsibility of a guarantor for a tenancy last?

So, does the responsibility of a guarantor come to an end when the tenancy ends? If the tenancy moves to a statutory periodic tenancy, the guarantor’s liability will continue. 

Also, keep in mind that if you increase the rent or change the terms of the tenancy without informing the guarantor and getting them to sign the agreement again, the original guarantee may become void. 

So, to protect yourself, you need to make sure that your Deed of Guarantee has a ‘variation clause’ worked into it. Best practice, however, is to have the guarantor sign a new agreement whenever the rent increases or the tenancy is renewed. 

The responsibilities of a guarantor for tenancy represent a massive commitment. For you as the landlord, it is the difference between being able to protect your investment and a total loss. When you make sure that you vet your guarantor, use a formal Deed of Guarantee, and clearly outline the scope of their liability, you’ll be able to create a stable environment for yourself and your tenants. 

So, you may be looking for landlord insurance to help protect your rental property. Get in touch with our team of specialists at CIA Landlords to get your tailored quote on 01788 818 670. Also, be sure to visit our advice centre for more information on how to manage your rental property.