Landlord, building insurance and Guarantor

lightSwitch_3

I am going to be a guarantor for a tenant who is going to rent a flat in london on a shorthold tenancy agreement for 12 months. Can you tell me please, if the building accidentally burns down, for example she forget the iron on or the oil in the pan catches fire, would I the guarantor be liable for the costs of rebuilding the property or does the landlord have to go through his buildings insurance? I understand that I am responsible for the contents but not sure about the building being destroy through her accident.

I don't know if the landlord has building insurance for his flat in this purpose built block. However my Guarantor contract has the following Clause

"The Guarantor shall pay and make good to the Landlord on demand all losses, damages, costs and expenses of the Landlord arising from or incurred as a result of any default by the Tenant in the performance or observance of the Tenant's covenants under the Tenancy Agreement."

The following section "demand all losses, damages, costs and expenses " does that open my liability to the building itself or are tenants statutory rights limited to contents damage only.

The part that gets me is the "all losses " although it does say that my responsibilities are the tenants responsibilities. So are the tenants responsible for rebuilding the accidental burning down of rented premises and possibly its neighbors.

Thanks

GDB2222

You are perfectly at liberty to refuse to sign this guarantee. Personally, I would not sign an open-ended guarantee but would insist on a maximum liability figure, eg £5,000.

I don't think you would be responsible for anything covered by insurance, and accidentally causing a fire is one of the insured risks. You just need to confirm that cover is in place. However, if the person you are guaranteeing turns out to be an arsonist, your liability could be greater.

As I said, a £5k limit (say) is reasonable all ways round, both to you and the landlord. You may feel happy to incur that level of potential liability even without legal advice. Otherwise, you will need to get paid-for legal advice, as you can't rely on a www forum. (See my sig.)

sooz

5k for London rents won't go very far, particularly on a 12month tenancy.

DawnW

Are you sure you really want to do this? Personally I would only do it for one of my children, and then only after a very serious talking to.

GDB2222

sooz wrote: »

5k for London rents won't go very far, particularly on a 12month tenancy.

It should cover 2 months rent for a S8 notice, plus say 3 months to gain possession, less the deposit. In practice, it means the guarantor will put pressure on the tenant to behave. £5k is quite sufficient for that purpose unless this is a luxury Mayfair flat.

Premier_2

If the tenant hasn't got a good enough credit profile that the LL requires a guarantor, then the LL will want a guarantor to cover the entire financial liability that the tenant could be liable for under the terms of that TA.

It is of course up to the guarantor whether they are prepared to sign such guarantee, but the LL probably won't accept it unless it covers the tenant's entire financial liability under the TA.

There's plenty of prospective tenants out there who don't even need the security of a guarantor to allow them to rent.

It wouldn't take long for a rogue tenant to cause more than £5k worth of damage to a property.

lightSwitch_3

Thanks guys for your responses.


GDB2222, they won't agree to £5000 cap because my girlfriend is unemployed so they want me to guarantee the rent and full contents, I will agree to this as she is an honorable person and won't mess around. I know I'm exposing myself here somewhat but it is a calculated risk.

I've just finished writing an e-mail to the agent telling him that I am not willing to open my liability to the building's structure due to say, a fire. The current guarantor's agreement leaves this open at the moment.

At the moment they have my deposit, I don't know why I gave it to them as at the time they hadn't even shown me the agreements or done the credit check on us.

QUESTION:
If they don't agree to explicity remove clauses that potentially open my liability to damage to the building's structure I will not sign. At what point can I NOT get my deposit back? I have not signed anything yet.

paintpot

I would suggest you think very carefully about this as others have said.

If your girlfriend stays in this property for a long period of time your liability will extend for as long as she is there (if the guarantor agreement is drawn up correctly). You may split up but your liability will continue and will do so for any arrears as well as any damage caused to the property. I know you say that your girlfriend is "reliable" etc but unfortunately people do change when push comes to shove. If she remains unemployed then you will find that if anything happens the LL will pursue you as guarantor rather than or in addition to the tenant (your girlfriend) as if you work and/or are a homeowner then they are more likely to enforce a court money judgement against you.

In terms of the buildings insurance I can give you an example. I had to claim on my insurance this year due to the negligence of my tenants in informing me of the problem (a leak) which caused substantial damage to my property. I claimed against my tenants for the insurance excess due to their negligence and this was covered in my tenancy agreement that I could claim this from them (it was the first time I have ever even deducted a penny from a tenant's deposit). They signed a document to state I could deduct it from their deposit and they have now moved out so it took some time for me to be repaid but they didn't contest it - it amounted to £250.

Dependant on the buildings insurance policy of the landlord it may exclude cover for certain things, for example, some policies exclude malicious damage caused by the tenant. Thus, if that was the case with this landlord's policy, if it was "proven" for example that your girlfriend intentionally set fire to the house, (arson) then you might be pursued by the landlord for their losses if the insurance didn't cover it or the excess as in my example. Otherwise, most scenarios should be covered by the insurance. I am just trying to give you examples so you can gauge exactly what you are signing up to.

I hope this helps.

Premier_2

lightSwitch wrote: »

...QUESTION:
If they don't agree to explicity remove clauses that potentially open my liability to damage to the building's structure I will not sign. At what point can I NOT get my deposit back? I have not signed anything yet.

What deposit have you paid exactly?

Normally this is for the tenant to pay. If it was a reservation fee (e.g. temporarily for taking the property off the market) then it probably is not refundable.

If it is the security deposit/bond associated with the tenancy agreement, then has the tenant signed the TA? If so, and the LL/LA has also signed then you can't get that back either, but you won't need to sign the guarantor form - it'll be too late for either side to back out.

If there is no signed TA in place, you should be able to get the security deposit relating to the TA back.

lightSwitch_3

Premier:
I will check what the receipt they gave me writes. I'm not actually sure what it says as my girlfriend has it. But I understand if it is a holding fee then they probably won't return it. But it was the amount of the deposit (ie four weeks rent) so it shouldn't be a holding bond. I'll read it again. Thanks Premier

Paintpot:

You raise an interesting point that makes me really nervous now. I didn't realise that the insurance may not cover damage caused by malicious damage by tenants. If I were a LL I would certainly want cover for that. But if he is not covered for this by his insurance then his next stop is with me - the guarantor.
My girlfriend is not an arsonist but what if someone else burns the place down and she gets the blame? I'm stuffed if I don't get the guarantor agreement excluding me from this liability. Thanks Paintpot you have really made me think.

paintpot

I have given you an extreme example based on your question about insurance. However, my point being that any losses incurred by the LL can moreorless be pinned on the guarantor if the document and tenancy are drawn up well. Similarly your girlfriend could have a party, the property gets damaged by friends, or she causes damage over and above the deposit, or she stops paying rent. If she can't or won't pay, it will fall to you to cover the costs. You may have a very stable relationship right now but relationships can and do fail.

Some policies do cover malicious damage by the tenant others only cover malicious damage caused by outsiders. I raised the point as an extreme and in the unlikely event the house was burnt down then I would suggest there would be a high burden of proof on the insurer to pin it on your girlfriend. I knew of a landlord whose house was turned into a cannabis factory by the tenant and this caused considerable damage to the property. The insurer deemed this to be malicious damage by the tenant and the LL wasn't covered. Not all LL's read or understand the smallprint of their buildings insurance until something goes wrong.

However, you are doing the right thing in knowing what you are signing up to before signing it.