Rent Guarantor: Why do you need one?
Whether you're a student, potential guarantor or landlord, our handy guide on guarantors is guaranteed to answer your questions.
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If you're an inexperienced renter or perhaps a student, you've likely been asked about rent guarantors for the first time when discussing your renting options with estate agents and landlords. It's essential to understand what a rent guarantor is and its implications if you fail to make your rent payments. It's also helpful to know your rights if you're planning to be a rent guarantor on behalf of someone else.
What is a rent guarantor?
A guarantor is someone that signs as your backup if you fail to pay your rent. In that case, the landlord or property management company will ask the guarantor to cover the cost. There are various situations where you'll need one, such as:
- You have a poor credit history.
- If you're a student or it's your first time renting.
- You don't have a job or proof of financial stability.
- You've come from abroad and don't have a financial history in the UK.
Tenants missing rent payments is one of the biggest worries for landlords. Many still have mortgages to pay on their property, so they can't cover their monthly expenses without the rental income. So, if your situation matches any of the examples given above, there's a good chance that you'll be asked to provide a guarantor.
Who can be a rent guarantor?
Generally, anyone over 21 years of age, with financial stability and a good credit record. In most cases, people use a family member or loved one since it's a big responsibility. Landlords, or the property management company, will usually conduct a check to ensure the guarantor has the means of covering the rent if you can't.
In most cases, as long as the guarantor can pass a credit check, you'll be approved, but there are certain situations where you'll be asked to choose someone else. This can be the case if they're retired, don't live in the UK or don't own property. Before agreeing to become a rent guarantor, ensure that you have the means of paying the rent if the tenant is unable to. If you refuse, the landlord will take legal action against you and potentially result in hefty fines.
What if you can't get a rent guarantor?
So, what if you can't get a guarantor? Not everyone has a family member they can ask. You might even be from abroad, which in that case, landlords won't accept a guarantor that lives overseas. Usually, you can circumvent this by passing a credit check or showing proof of funds to cover payments.
To do this, the property company or landlord will need salary confirmation from your workplace or a copy of recent bank statements. In some cases, if you've come from abroad, landlords will ask that you pay a few months upfront to build trust. If you're concerned about covering the cost of a deposit, some local councils offer monetary help. You should get in touch and explain your situation.
If you're still struggling to rent a property despite having enough funds to cover rent payments, you could consider a guarantor service in the UK. These are companies that will act as your guarantor when you sign a new tenancy agreement. Typically, these companies will cover the entire tenancy period so that you don't have to pay costly upfront rent payments.
Note that some companies will still require you to co-sign with someone that will ensure that you uphold the agreement. Most will also request to see bank statements from the previous three months or proof of student status and finance if you're a student. You'll also have to pay a fee to secure the service, which will depend on what type of tenant you are and how much your rent will cost.
Here are some companies that provide rent guarantor services:
As the name suggests, Rent Guarantor will act as your backup if you need to rent a property. The company caters for students, professionals, and people on benefits. They don't charge up-front fees and only request payment once you've signed a tenancy agreement.
The company also has a useful quick quote calculator online that will give you a rough idea of how much you'll be paying for the service. If you're a student, you'll need to prove your student status, and if you're on benefits, you'll have to provide proof of universal credit.
Housing hand provides a fantastic service for students and professionals that need a guarantor and are still looking for a property. The company offers a property finder service to match you with various properties and estate agents in the UK. It will also act as your guarantor when you sign the contract. Note that housing land doesn't provide guarantor services to people on benefits.
The company charges an up-front fee of £75 and then a monthly fee after moving into the property. Housing hand also claims to have made 100% of payments on defaults and is the only guarantor service that allows you to pay monthly.
Guarantid provides rent guarantor services for professionals, students, people on benefits, and international applicants. The company offers a fantastic price proposition, charging only three weeks rent for the service. You also won't need anyone to co-sign the agreement with you. The company can act as your guarantor for up to 12 months. Once the period is over, you'll need to sign a new agreement and go through the same checks again.
Payment can be made in full or in two instalments, depending on your preference. If you're employed or self-employed, your salary will need to be 22 times your monthly portion of the rent.
Also, although the company can act as a guarantor for people on benefits, it won't do so if it's your only source of income. Benefits can't make up more than 20% of your total income.
If you're a student and you need a guarantor for student accommodation, you'll find that many universities, such as LSE, provide a guarantor service. This is usually offered to international students but can also be arranged for UK students who don't have someone to put down as a guarantor. You should get in contact with your university's housing and accommodation team and enquire about the service. If your university doesn't provide this service to domestic students, you can always go through a traditional rent guarantor service.
What happens if you stop paying rent?
We've touched on who can be a guarantor, and now we'll look into what happens if you miss a rent payment. Your landlord will likely understand a one-off occurrence. There are many reasons why you'd be late on one payment, but as long as you settle the arrears, you should be fine.The problem comes when tenants miss multiple payments or stop paying rent altogether. In this case, the landlord will revert to your guarantor to make the payments. If the guarantor refuses to pay, the landlord will then take legal action.
Note that this only applies if the guarantor can pay but is choosing not to. If the guarantor has no means to pay, getting your money would be more challenging, which is why a good guarantor check is essential.
How much does a rent guarantor have to pay?
The rent guarantor will be liable for the total rent cost plus any incurred interest. In some situations, if the contract stipulates it, the guarantor will also have to cover any damage done to the property that the tenant can't or won't pay. The guarantor will cover the rent until the rental period ends, so it's a good idea to conduct credit checks to ensure the guarantor is financially capable. If the guarantor can't or is unable to pay, the landlord can take legal action.
The guarantor can potentially seek to retrieve the losses they incurred from paying the rent directly from the tenant. This is usually more common with mortgage loan guarantors but can also be the case for rent guarantors. In this situation, the best course of action is to seek legal advice and discuss what options are available.
Are guarantors a legal requirement?
No law forces landlords to request a guarantor when letting out a property; however, any sensible landlord will do so. Not having a guarantor will put you at risk of not receiving enough income to cover the cost of your mortgage. If the tenant can't provide you with a guarantor, you should ask for payment upfront or suggest a rent guarantor service that they may use instead.Don't be tempted to accept a tenant without a guarantor to avoid the void. Remember, it's always better to be safe than sorry.
Rent guarantee insurance
If you're a landlord and are concerned about tenants defaulting on their rent payments, you should consider taking out rent guarantee insurance. As the recent pandemic highlighted, there can be times when even the most diligent tenants fail to pay rent due to losing their job or other personal reasons.Getting insurance will protect you from this possibility, with companies covering you for a predetermined period (typically 15 months) and, in some cases, the cost of evicting tenants. The cost of rent guarantee insurance will depend on the property value and the coverage period. Also, note that you can't take out a policy once the tenant has defaulted, so ensure that you consider this option beforehand.
What you should consider before agreeing to be a rent guarantor
As highlighted in this guide, there are risks to being a guarantor. If the person you are backing fails to make rent payments, it will fall on you to cover the costs. So there are certain things you should consider before agreeing to it:
- Are you financially stable? If you have large overheads, can you also afford to cover rent payments for someone else?
- Are you comfortable with being a guarantor, or do you feel pressured to do it?
- Has the landlord or property management company done a proper guarantor check?
If you feel pressured to be a guarantor or that you wouldn't be able to cover the rent payments, it's best to not agree to it. Even if you trust the person you're guaranteeing; there are many situations where they might be unable to pay the rent, leaving you liable. It could then lead to a lengthy court process and extra costs.
You also can't remove yourself from being a guarantor during the tenancy process. If you feel like the landlord or property management company didn't do enough checks, you could complain to the Property Ombudsman. If they find that the checks weren't sufficient, you could be removed as a guarantor, and any money you've paid could be refunded plus interest.
What can landlords do if the guarantor refuses to pay?
If both the tenants and guarantor refuse to cover rent as stipulated in the rental agreement, there are a few steps you can take. To begin with, you or the property management company should attempt to settle the issue without going to court, as it's quicker and cheaper. You might suggest that the tenants pay the missing months and find someone to rent a property to replace them in the tenancy agreement.If you're in a situation where a tenant refuses to both pay and leave the property, you should seek legal advice.
At this point, your best option is to take legal action against the tenants and work towards eviction proceedings. Ensure that you have evidence that the tenants haven't paid their rent in case they dispute the eviction notice. The cost of evicting a tenant will depend on the length of the process and whether you choose to go through county or high court. Also, the judge might delay the process at the tenant's request if they state that they can cover rent and would like to remain in the property.
We hope this guide has been useful in covering everything you need to know, whether you're a guarantor, landlord, or tenant looking to rent. At Oasis, we let and manage your property for you so you can avoid the hassle. Find out more on what we offer or get in touch with our team today.
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