Having a guarantor unfortunately is not a 100% guarantee that the landlord will be covered for any default by the tenant.  A guarantor’s circumstances can change just as tenant’s circumstances can change.  They could lose their job, they could move without giving a forwarding address, or they could sell their assets such as their home.  The guarantee is only as good as whatever cash/assets the guarantor has at the time the landlord wants to rely on the guarantee.

Landlords should also remember that just because a guarantor is a home-owner, there is still no certainty they will get their cash.  If the guarantor cannot or will not pay what he or she is liable to pay under the terms of the guarantee, the landlord can sue the guarantor and obtain judgment.  The landlord may then obtain a charging order against the guarantor’s property, but this will only secure the debt, it will not realise any cash for the landlord unless the property is sold. 

In some circumstances the court will make an Order for Sale of the property upon an application being made, but the order is at the court’s discretion and depends  upon the guarantor’s circumstances, and of course even with an Order for Sale from the court, there still needs to be a willing buyer for the property.  If the property is jointly owned then the debt will only be secured on the guarantor’s share of the equity in the property.  There may be limited or no equity in the property if there are several other prior charges and mortgages secured on it.

So why use Guarantors?

The above is in no way intended to discourage landlords from obtaining guarantees; signing up a guarantor is a very wise precaution. Guarantors that own their own property are more likely to be a better choice for the role; just do not be under any illusion that a home-owner guarantor will provide a fail-safe guarantee.   

It is quite normal for a landlord to ask for a guarantor in addition to (or instead of) a deposit. A guarantor can bring additional security where for example: 

• The tenant has a low income and the landlord is unsure as to whether the tenant can regularly meet the rent.
• The tenant is a student or under the age of 21.
• The tenant is a first time renter.
• The tenant has only recently moved to the UK.
• The landlord is unable to obtain references from a previous landlord.

Whichever type of tenant market you are letting in, you should carefully check out the guarantor and ensure checks on them are as thorough as any reference check made on the tenant and draw up a properly drafted guarantee agreement.

Need advice? We can help you

If you would like any advice as to drafting a guarantee agreement or enforcing guarantee agreements please do not hesitate to contact me on: 01482 324252 or email scm@gosschalks.co.uk

You can find out more about our Property and Real Estate Law services here href=\"http://www.gosschalks.co.uk/">>www.gosschalks.co.uk  

About the author:

Sarah Coats Madden, is a Solicitor within the commercial and property litigation department at Gosschalks, Queens Gardens, Kingston upon Hull, HU1 3DZ

• Board member of Pickering and Ferens Homes, a local charity and Registered Housing Provider
• Regular speaker at the meetings of the Humber Landlords Association.

THIS IS NOT A COMPREHENSIVE GUIDE AND YOU SHOULD ALWAYS SEEK YOUR OWN ADVICE.

Gosschalks is authorised and regulated by the Solicitors Regulation Authority under number 61213