Guarantor for Private Accommodation

eloise67

Hi, how does this work, if a person is in receipt of the Local Housing Allowance but needs a Guarantor for the Landlord, the LL wants info on Guarantor's Salary and Rent/Motgage commitments, what Annual salary would the Guarantor have to be earning to be able to help.

The private rented property is £500 pcm they also require £150 as a reservation fee which is non-returnable, (is that legal). Thank you in anticipation for any help/advice you can offer.

BitterAndTwisted

It's not about the level of earnings it's about whether the guarantor could afford to pay the whole of the rent if it became necessary. Landlords also like guarantors who are home-owners with lots of lovely equity so your granny who's living on her state pension while doing a part-time cleaning job might not cut the mustard but she would if she owned her home outright or if she had plenty of savings.

eloise67

Hi, thanks for your reply. The Guarantor is already renting and does not own any property. Also surely with the Local Housing Allowance the LL is guaranteed the rent.

docmaggiemay

Well no. As I've recently discovered. Because the benefit is paid to the tenant not the landlord. So an unscrupulous tenant like mine, now gone, who lied to the letting agents and me telling us he wasn't on benefits in fact was, and indeed had previously been evicted for non payment of rent to the council. And kept the money and didn't pay me either. He wasn't properly vetted but that's a side issue. Until the tenant is more than two months in arrears you can't have the benefit paid directly to the landlord.

zzzLazyDaisy

My friend stood guarantor for someone as a favour, knowing that he was on LHA, and so it was a formality (so she thought). She was also led to believe that the guarantor agreement was only for six months - untrue as it turned out, but she didn't take legal advice before signing it.

Three months later he defaulted on the rent - he is still getting the rent cheques from the local authority, but he is spending them. The LL hasn't got its ar5e into gear to get the money direct from the council, and is now chasing my friend for the rent (she can't afford it without selling her house as her circumstances have now changed).

She has asked to be released from being a guarantor but the LL won't do this unless he vacates the property (why would he, he is living rent free, spending the LHA cheque, and waiting for her to pay his rent for him). The LL refuses to start possession proceedings.

It is a nightmare for my friend who is on the verge of a nervous breakdown with the worry of it all.

Please, if anyone is considering being a guarantor, make sure you understand the commitment you are making - you could potentially be tying yourself financially to this person for a very long time.

G_M

zzzLazyDaisy wrote: »

Three months later he defaulted on the rent - he is still getting the rent cheques from the local authority, but he is spending them.
.

This is exactly why landlords ask for guarantors.

The LL refuses to start possession proceedings.

If this is still in the fixed term of the tenancy the LL has no grounds for possession since there are no rent arrears!

She has asked to be released from being a guarantor but the LL won't do this unless he vacates the property (why would he, he is living rent free, spending the LHA cheque, and waiting for her to pay his rent for him).

You are absolutely right. Guarantors are making a huge legal commitment and need to think hard before agreeing. But of course that is exactly why LLs want guarantors as said above.

zzzLazyDaisy

G_M wrote: »

This is exactly why landlords ask for guarantors.

If this is still in the fixed term of the tenancy the LL has no grounds for possession since there are no rent arrears!
.

The fixed term has now rolled over into a periodic tenancy, and he is now three months in arrears (my friend has not made any payments under the guarantee, precisely because of the two month arrears required for a S8 and/or direct payments). The LL is chasing my friend for the rent but refusing to start possession proceedings (under either S21 or S8), and so far has failed to apply for direct payments so he is still getting the rent money from the council and spending it.

In my view the LL has a duty to mitigate its loss, which means taking appropriate steps to ensure this situation does not run and run, but so far they seem to think they can sit back and let the guarantor pick up the tab without taking any steps to remedy the situation.

eloise67

Hi, thank you both for the information, it makes for horrible reading, it apalls me that some people could actually do such a nasty thing, LazyDaisy I do hope everything turns out okay for your friend, thats just awful. I think the Local Authorities should be having a rethink and stop sending the payments to the tenant and send them directly to the Landlord, that to me would certainly make more sense and then maybe there would not be any need for Guarantors.

N79

zzzLazyDaisy wrote: »

In my view the LL has a duty to mitigate its loss,

Morally I agree. Legally the situation is very grey. There is no direct case law which deals with this point but all the case law that does exist (in relation to commercial tenancies) states that the LL does not have a duty to mitigate their loss (eg see Reichman & Anon vs Beveridge & Anon from 2006).

which means taking appropriate steps to ensure this situation does not run and run, but so far they seem to think they can sit back and let the guarantor pick up the tab without taking any steps to remedy the situation.

Your friend should seek legal advice on the guarantor agreement. It is possible that the agreement may not be valid on a "technicality". Otherwise, if your friend can not pay I'm sure the LL will see sense eventually.

Jowo_2

eloise67 wrote: »

... they also require £150 as a reservation fee which is non-returnable, (is that legal)...

Letting agents are allowed to charge what they like in terms as fees. About the only restriction they face with rather toothless legislation is that they can't charge fees to tenants just to view the property or provide them with lists of their accommodation.

It's fairly common for landlords or their agents to credit check the guarantor (no point in having a guarantor who has a history of defaulting on their financial obligations if the tenant won't pay the rent).

It's also fairly common to charge a holding deposit, which can be non-refundable. It deters timewasters from asking for a tenancy and then withdrawing because they've changed their mind or because they aren't in a position to proceed with it.

http://england.shelter.org.uk/get_advice/finding_a_place_to_live/renting_privately/letting_agencies#3