rent guarantor rental

alanfp

Hi
Any advice, please?

Just been asked to act as guarantor to a trusted cousin (one of the good guys) for a house he wants to rent.

I need to make more enquiries, but I understand that landlords often insist on a guarantor OR 6months rent in advance. I am reluctant to act as guarantor if I can avoid it, but I am in a position to lend him 6 moths rent at the moment, with an understanding that he'll pay me back monthly. I trust him to do that. The upside is that I see a 6 month liability rather than a potentially endless one.

Q1 The fact that he is likely to go bankrupt in the next few months - would that mean that he won't be allowed to pay back his loan to me but has to include it with all his other debts (and I could end up with 10% of what he owes me). I know he would agree to pay me back in full, but I'm worried that the courts may go through his outgoings and rule that I am just another creditor.

Q2 If I do go guuarantor route, is the a time limit on it, or is it for as long as he is living there (which could potentially be 10 yrs)?

Q3 Anything else that might help me.

Hump

6 months in advance to any landlord is (utter) madness - if you have to do this then try to use an agent which is a member of ARLA - ask them to hold the money in their client account and drip feed it to the landlord each month - ARLA members are bonded meaning if the agent goes bust the money is safe. The problem with giving it all to the landlord is if they go bust or get repossessed early on in the 6 months your cousin could be out of pocket

theartfullodger

Guarantor is pretty much a blank cheque... you're stuffed if there's a problem. I'm sure he's a wonderful person but - loses job/gets sick/family crisis/meets new love & moves of New Zealand?? - You're stuffed!

poolboy

I am a LL & usually get 6mth in advance, if you have adverse credit & no guarantor it's that or look elsewhere.

My mortgage is payable every month regardless of the T's ability to pay.

It depends on the local economy - my flat could let several times over & I am not greedy on price.

DVardysShadow

Hump wrote: »

6 months in advance to any landlord is (utter) madness - if you have to do this then try to use an agent which is a member of ARLA - ask them to hold the money in their client account and drip feed it to the landlord each month - ARLA members are bonded meaning if the agent goes bust the money is safe. The problem with giving it all to the landlord is if they go bust or get repossessed early on in the 6 months your cousin could be out of pocket

Being a guarantor is even madder. At least fronting up 6 months rent, you know your max losses. As guarantor, your losses can go far higher with little effective limit.

alanfp

Thanks for your replies.

The good news is that the letting agent is happy for me to limit the guarantee to the initial fixed 6 month term, which I am happy to do.

I didn't like the idea of a potentially never-ending liability...having now seen the terms of the guarantee, that's what it could have been, i.e. as long as my cousin stayed at that address.

scottishblondie

Make sure that the 6 month liability is included in whatever contract you sign. It wouldn't be the first time that a letting agent told you what you wanted to hear to get a signature!!

G_M

From Landlordzone:
Guarantors MUST have seen and approved the tenancy agreement they are guaranteeing prior to the signing and they must also sign a Deed of Guarantee. This signing should be witnessed.

This is NOT a contract, or 'agreement' as there is no 'consideration'. ie the guarantor receives nothing from the landlord/agent in return for his guarantee. So it has to be a 'Deed' to be legal. This fact is often not understood, even by 'professional' agents.

Also from Landlordzone:
The wording of the Guarantor Agreement is crucial. This is a legal contract and will be strictly enforced by the courts according to how it is worded - there is no standard form or statutory Guarantor Agreement.
Is the agreement confined to the original lease term, or will the obligation continue into subsequent terms or a periodic tenancy? Both parties need to be clear on this.
If the agreement states that the guarantor is a primary obligator the guarantor will be obliged to carry on paying until the end of the term certain, or when the tenant leaves if the tenancy has become a periodic one.
On the other hand, should the agreement state that the guarantor indemnifies the landlord against losses due to the tenant's default or failure to observe the agreement terms, then the landlord is obliged to minimise her losses.
For example, she may be expected to use possession proceeding or re-let as soon as possible if the tenant leaves within the term certain, leaving the guarantor to pay his rent.
However, the guarantee agreement may state that the landlord is not obliged to minimise his losses, in which case he could sue and the guarantor would have to keep paying.
In extreme cases the guarantor may be forced to sue the tenant for damages and apply to take over his tenancy, thus making it possible for her to terminate the tenancy agreement.

theartfullodger

alanfp - G_M is absolutely right - but if you are presented with a guarantee which is (eg) not a Deed or not to be witnessed - DO NOT COMPLAIN!!! Without these, hopefully, the Landlord/agent will not be able to enforce the guarantee...

poppysarah

alanfp wrote: »

Hi
Any advice, please?

Just been asked to act as guarantor to a trusted cousin (one of the good guys) for a house he wants to rent.

Q1 The fact that he is likely to go bankrupt in the next few months

So he's a good guy apart from with money?

Being a guarantor is basically opening up your wallet and saying "take it"...

I wouldn't do it for someone who was bad with money. I wouldn't do it at all.

alanfp

poppysarah wrote: »

So he's a good guy apart from with money?

Being a guarantor is basically opening up your wallet and saying "take it"...

I wouldn't do it for someone who was bad with money. I wouldn't do it at all.

I appreciate your opinion, and yes, he is 'good' which I mean in terms of morals, and not in terms of being technically good with money.
It is one of those unfortunate cases where he took out a loan with a sharp operator (timeshare related - like thousands or millions of other people) when he was working for what seemed like a successful firm, but he then got made redundant, and couldn't meet the loan repayments.

But I know he has enough income to pay the rent.

... and bear in mind, he's my relative - if I can help him keep a decent roof over his head I'll do what I can (and it will also prevent him having to take up a council house ).