In the UK rental market, it’s common for landlords to request a rental guarantor from tenants, especially if the tenant is an international student or working professional, or has a low credit score.
If you’ve been asked to act as someone’s guarantor, it’s important to fully understand your financial and legal obligation before accepting.
In this post, we’re going to break down the primary risks of being a guarantor, and what becoming one could mean for you.
What does a guarantor do?
First, it’s important for you to understand your role as a guarantor.
In an ideal world, after providing the landlord with documentation and signing the agreement, a guarantor won’t have to do anything.
Guarantors are present on the rental agreement to provide additional financial security for both the landlord and the tenant. As long as the tenant keeps up with their rental payments, there would be no action required from the guarantor.
They’re essentially liable for a tenant’s rent in the event that the tenant is unable to pay.
Given the level of trust required in this relationship, guarantors are most commonly a family member or friend of the tenant – usually a parent or guardian.
What are the risks of being a guarantor?
Now that you understand your role as a guarantor, it’s also critical to understand your risk if your tenant is unable to fulfil their financial duties.
Financial and legal responsibility
Being responsible for someone’s rent is a big responsibility. A typical guarantor is responsible not just for unpaid rent but also any damages or costs associated with the tenancy that the tenant cannot pay, such as any legal fees paid for by the landlord.
A guarantor agreement is a legally binding document. Once the agreement has been signed and approved, you are legally liable for the tenant’s rent if they cannot pay for the full length of the contract.
Even after the tenancy is finished, you could still be liable for any damages or costs.
Your ability to honour this responsibility must be carefully considered before proceeding, even in the worst-case scenario.
You could be responsible for others
If the tenant is moving into shared accommodation, it’s essential to check the tenancy agreement before proceeding as their guarantor.
In some cases, you could end up being responsible for the entire rent, including the other tenants’ share who you may not know. This could be disastrous if more than one tenant fails to make payment.
Ensure your guarantor agreement includes details on how much rent you’re responsible for. We recommend seeking independent financial advice before signing any agreements to ensure you’re crystal clear on your responsibility.
Potential for huge debt
If your tenant doesn’t make payment for multiple months, or leaves the property without paying, you could be liable for a large sum of money.
Depending on the price of the tenant’s rent, this could put a financial strain on you and generate a large amount of debt.
Credit score impact
If you’re unable to pay on behalf of the tenant as their guarantor, this can have a hugely negative effect on your credit score.
A weak credit score can make it difficult to take out loans, credit cards or get on the property ladder.
Relationship strain
Being a guarantor is a big responsibility that requires trust. There’s a reason why most guarantors are usually the tenant’s parent or guardian.
In the event that a guarantor needs to step in and pay, this can put a massive strain on the relationship between guarantor and tenant.
Legal action
If you cannot honour your obligation as a guarantor, the landlord could take you to court to claim any unpaid rent.
Legal action can be scary, expensive and time-consuming.
Key takeaways
In an ideal world, you won’t need to do anything as a guarantor beyond signing an agreement and providing documentation.
However, bad things happen, and it’s essential to understand the risks associated with your role as guarantor if your tenant is unable to make payment.
Being a guarantor is a huge financial and legal responsibility. If you’re not careful, you could sign an agreement stating you’re responsible for the entire rent (including other people’s).
If your tenant really struggles financially, you could rack up huge amounts of debt.
In the worst-case scenario, if you’re unable to fulfil your obligation, a landlord could legally pursue you.
Always seek legal advice before signing a guarantor agreement, and ensure you’re financially stable enough to manage the risk.
