Recovery of rent and losses incurred following breaches of a tenancy agreement by a tenant is, of course, a priority for landlords. Landlords should, therefore, always consider obtaining security, particularly with student tenants. As the increase in redundancies leads to an increase in tenants who cannot afford to pay their rent then whilst rent guarantee insurance is available, at a premium, to landlords, a useful tool is for them to obtain a guarantee.
There are two types of guarantee. The first is one which can be incorporated by way of additional clauses into the tenancy agreement. In this instance the guarantor would sign the tenancy agreement as well as the tenant.
The second type of guarantee is one by way of a deed of guarantee. Yes, this would entail a separate document (as if landlords don’t have enough of these already to deal with) but it is the method which we would suggest is employed. It is simple and neater overall and effectively sets out the guarantor’s obligations. Usually the deed of guarantee would be unlimited so that the guarantor is guaranteeing the whole rent and any damages under the tenancy agreement. Where the guarantor is unwilling to extend the indemnity that far (for example in student accommodation a parent may not wish to guarantee rent payments by other tenants other than their child) it is possible to have a limited guarantee which could, say, guarantee a share of the rent but with unlimited liability in respect of other breaches.
In order to properly execute a deed of guarantee it must be signed by the guarantor in the presence of a witness. That witness must also sign the document. The guarantor must be provided with a copy of the tenancy agreement (attach it to the deed) in order that they are aware of the liabilities that they are covering. Ideally, the guarantor signs the deed in the presence of the landlord/agent.
It is worth considering whether or not the guarantor would be able to settle any liability of the tenants should a breach arise. Therefore, checks should be made on the guarantor as you would do a prospective tenant. The landlord should check that the guarantor has assets to pay any liability and a Land Registry search can be undertaken at low cost to confirm whether or not the guarantor owns their home.
Landlords need to keep an eye on the duration of any guarantee and be aware that should any term of the tenancy change or, a new tenancy be entered into, the guarantee will automatically come to an end and the landlord will need to seek new security.
We can provide you with guarantor forms and/or revise your tenancy agreement so that landlords are protected and the documents are up to date. We have experience in successfully pursuing claims against guarantors in the County Court in Yorkshire and beyond. If you require any assistance then please contact either Gareth Archer or Lynne Branchflower.