Renting out your property to new tenants can be a bit daunting, even for seasoned landlords. Despite conducting various checks to ensure reliable tenants, there may still be a need for additional reassurance to make the rental process as safe and dependable as possible.

If you find yourself having even the slightest concerns about potential tenants or their ability to pay the rent, it's advisable to explore the option of using a rent guarantor. Not familiar with the concept of a rental guarantor or when to request one? Don't worry; our comprehensive guide covers all the essential information you need to know about this subject.

In simple terms, a rent guarantor is an individual who takes on the responsibility of guaranteeing rent payments and fulfilling other rental obligations on behalf of the tenants. This arrangement is beneficial for landlords as it offers protection by ensuring rent payments are made, even if the tenants face financial difficulties or fail to comply with the tenancy agreement.

For tenants, having a rental guarantor brings a sense of security and peace of mind. Instead of having to borrow and repay a loan, they can rely on the safety net of guaranteed financial support, though this places a considerable amount of trust on the part of the guarantor.

Typically, the minimum age requirement for a guarantor is anyone over the age of eighteen who is a wage earner. To be considered, they must be a UK resident, capable of comfortably covering the rental costs from their earnings, and able to present a satisfactory credit report. Additionally, most guarantors are expected to be homeowners themselves.

For many tenants, this means approaching a parent, family member, relative, or friend to act as their guarantor. In cases where a tenant is unable to find someone to fulfil this role, they can usually opt for a rent guarantor insurance company.

Rent guarantor insurance companies function similarly to UK resident guarantors and are especially suitable for international students, individuals receiving benefits, and other parties who are unable to provide a suitable guarantor.

The required income for a guarantor depends on the amount of rent that would need to be covered in the event of a claim. Typically, letting agents or landlords will expect guarantors to earn at least three times the annual rental amount.

While some agents or landlords may only need the guarantor's confirmation that their income is sufficient to cover the tenant's rent, it's more common for them to conduct additional checks. These checks often include a credit score assessment and a reference from the guarantor's employer to verify their earnings.

For self-employed guarantors, providing a reference from their accountant is usually necessary to validate their average earnings over several accounting periods.

Many letting agents and landlords stipulate that a guarantor must be a homeowner. This condition provides the landlord with additional assurance, knowing that the guarantor possesses tangible assets to rely upon in case of a claim and cannot easily evade their responsibilities.

Indeed, pensioners or retired individuals can serve as guarantors, but they are typically expected to demonstrate a steady income that is adequate to meet their obligations. Specific requirements may differ between different credit reference agencies, but generally, as long as the person possesses sufficient funds to cover the rental payments, they can fulfil the role of a guarantor.

For pensioners and retired individuals, their income sources may encompass part-time earnings, state and private pensions, pension drawdowns, savings, and other liquid assets.

As a landlord, you may choose to request the use of a rent guarantor in certain tenant situations to provide an extra layer of security. Some landlords now make it a standard practice to require a guarantor, especially when the rental market is competitive, and they have the luxury of selecting from various prospective tenants.

Using a guarantor can be particularly beneficial in the following scenarios, where a tenant fails to meet one or more of the criteria listed below:

A landlord can reach out to a guarantor to recover unpaid rent starting from the day after it falls due. However, the guarantor is not legally obligated to make any payments until specifically requested to do so by the landlord or agent.

In some cases, the landlord and tenant might agree on a repayment plan directly, without involving the guarantor, or opt for assistance from a tenancy mediation service like The Property Redress Scheme's Tenancy Mediation Service. If such an arrangement is made, the guarantor is not required to take any immediate action.

If you believe that involving a guarantor or arranging a guarantor loan is the best approach when renting to tenants, there are several crucial steps that should be taken before finalizing a guarantor agreement.

Firstly, guarantors should undergo credit checks and provide references just like tenants. These checks are still necessary for your tenant/s. Ensuring that the guarantor has sufficient funds to cover the monthly rent and any potential liabilities is also essential.

One important aspect often overlooked by tenants, guarantors, and landlords is the extent of liability in joint tenancy agreements. In a joint tenancy, where multiple occupants share the property (commonly seen in student houses), if a guarantor supports one tenant, they effectively become a guarantor for all tenants. This is known as "joint and several liability," meaning each tenant is responsible for the entire rent if others default. To address this, the guarantor's liability can be limited to the rental amount for their relative specifically, but legal assistance may be needed to modify the guarantee agreement accurately. It's advisable for guarantors to seek legal advice before entering any guarantee agreement.

Furthermore, a guarantor cannot be held liable for responsibilities they were not fully aware of before accepting them. Providing an opportunity for the guarantor to review and ask questions about the agreement before the tenancy start is crucial.

To be legally enforceable, a guarantor agreement must comply with the requirements of the Unfair Contract Terms Act 1977 and the Government's Unfair Contract Terms Guidance. As there's no standardized form for a guarantor agreement, it is essential to draft them properly and seek legal advice to ensure enforceability.

The guarantor agreement should clearly identify the relevant tenancy, the parties involved, and the property's address. As there is no direct consideration in the guarantor contract, the document must be signed by the relevant parties and witnessed as a deed.

Throughout the tenancy, any changes such as tenant arrears or property damage should be communicated to the guarantor in writing promptly, allowing them to take remedial action if necessary.

Typically, the guarantor's liability lasts for the fixed-term tenancy's duration, and the agreement may need renewal if the tenancy continues beyond the fixed term. Future guarantor agreements should consider continuing liability due to the forthcoming changes to residential tenancy laws in England.

Even with a guarantor agreement, it's crucial for landlords to have comprehensive landlord insurance to be adequately covered for accidents and unexpected damages.

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