Tenancy Guarantee agreements

G_M

Until recently, my understanding was that a guarantee agreement had to be Executed as a Deed and witnessed as such. The legal logic for this, I understood, was that the agreement was between landlord and Guarantor, and that since there was no ‘consideration’ ( the guarantor receives nothing from the LL) it could not be a contract, therefore had to be a Deed to be enforcible.
However having recently done some online searches, I find much conflicting information:

Landlordzone:

the guarantor's agreement with the landlord. This states:

• The date of the agreement
• The term to which it applies, when and how the obligation ends
• The signatures and names of the parties to the agreement
• The property
• The names of the tenant/s

Points to watch:
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.

(no witness mentioned, and describes it as a contract)

Landlordlaw:

There are two ways this can be done. Probably the simplest is use a tenancy agreement which includes a guarantee section and which the guarantor signs as well as the tenants. ........have a separate deed of guarantee for the guarantor to sign.
If a separate document is used however, it should either be signed before the tenancy is signed, or should be ‘signed as a deed’ (which means getting the signature witnessed). There is a legal reason for this – the ‘consideration’ or benefit that the guarantor will get, is the fact of the tenancy being granted to the tenant. If the tenancy has already been signed and agreed, then there is no ‘consideration’ and the guarantee could therefore be unenforceable.

Unipol Guarantee agreement. (No witness. Not a Deed)

Letting focus:

HOW TO SIGN UP A GUARANTOR ON A TENANCY CONTRACT

There are two ways to sign up a guarantor.

First, you could make it part of the tenancy agreement itself and with a special clause attached at the bottom which sets out the liability of the guarantor - or you could do a “special deed of guarantee”.

It now appears to me, therefore, that a guarantee clause/section within the tenancy agreement is valid. But I am still dubious. And if so, does this too need to be witnessed like a Deed?

mchale

My solicitor drew mine up and advised it was to be executed as a deed. And I once had a tenant who's father was a judge and was to be his son's guarantor, upon him receiving the paperwork his mother was signed up as the guarantor (father did not want to sign paperwork), which made me think the paperwork was fairly bomb proof in legal term's.

gRoberts

I'm currently going through a tenancy process that despite having no problems with my finances, they stated that they requested a guarantor for every applicant (private LL without acting EA.)

I assume the whole "witness" is up to personal interpretation, however I see it has someone has to physically see that person sign the guarantee form.

My guarantor signed the guarantee form without anyone witnessing it, however after it was signed, I then signed it my self and the LL signed it when they finally received it. After, I received a copy with all three signatures on for my records.

I've always assumed that when requiring a guarantor, that you must carry out checks to ensure that the guarantor can actually afford the amount they are guaranteeing?

G_M

mchale wrote: »

My solicitor drew mine up and advised it was to be executed as a deed. That an agreement executed as a Deed is binding is not at issue - I'm asking about guarantee agreements incorporated into tenancy agreements..

And I once had a tenant who's father was a judge and was to be his son's guarantor, upon him receiving the paperwork his mother was signed up as the guarantor (father did not want to sign paperwork), which made me think the paperwork was fairly bomb proof in legal term's.or the judge knew it was NOT bomb proof but was happy to have his wife sign a document he knew could never be enforced......?[/QUOTE]

My guarantor signed the guarantee form without anyone witnessing it, however after it was signed, I then signed it my self and the LL signed it when they finally received it. After, I received a copy with all three signatures on for my records.

It is well known that many landlords, as well as letting agents, get this wrong. The fact that this is what you were asked to do does not mean it was legally binding.

DVardysShadow

gRoberts wrote: »

I'm currently going through a tenancy process that despite having no problems with my finances, they stated that they requested a guarantor for every applicant (private LL without acting EA.)

I will say it again, LL's who have a blanket policy like that are fools to themselves. I actually have no one I would call upon to be a guarantor. In polite society, if you don't have relatives who can take on the role, you don't ask other people. Mature financially stable people do not often have potential guarantors available.

So the LL is actually ruling out some of the best potential tenants.

DVardysShadow

The most interesting of the references is Landlordlaw

If a separate document is used however, it should either be signed before the tenancy is signed, or should be ‘signed as a deed’ (which means getting the signature witnessed). There is a legal reason for this – the ‘consideration’ or benefit that the guarantor will get, is the fact of the tenancy being granted to the tenant. If the tenancy has already been signed and agreed, then there is no ‘consideration’ and the guarantee could therefore be unenforceable.

Mostly, this looks thought up on the hoof. The idea of the consideration to the guarantor being the granting of a tenancy to the tenant could stand, I think in one particular situation - that of a student, where the parent acts as guarantor, because the granting of the tenancy is something the parent would presumably want.

But in other circumstances, the guarantor is doing it as a favour to the tenant and the idea of the granting of a tenancy being consideration to the guarantor is pure baloney. I doubt there is much case law to support the contention - and if ever it arises, I suspect it would be determined one way or the other according to whether the tenant was a student or not - leaving more loose ends to address with case law when a hard case comes up with the tenant a student, when previously it was a non student.

Overall, the current law surrounding guarantees is deeply unsatisfactory and I think some legislation is required to limit the liability of guarantors, so that LL's don't lean too much on the guarantee and take the mick and so that more people with financial maturity would feel inclined to take a risk on a clearly delimited liability.

G_M

I agree with all you say DVardyShadow, but I'm still in the dark as to
a) what advice to offer LL's or tenants positing here for advice on guarantee agreements and
b) whether I can incorporate a guarantee agreement into my tenancy agreement, when required, (as opposed to using a seperate Deed), and if so how.

The 4 sources I quote are by no means the only ones. Google produces all sorts of examples of so-called GAs, many from apparantly reputable sources (eg landlordlaw!) as well as much conflicting advice.

It certainly appears that the safest option for a LL is a witnessed Deed, executed prior to the granting of the tenancy, but what advice would you offer a tenant or guarantor who wanted to contest the validity of a GA incorprated into a TA?

DVardysShadow

I would suggest that the guarantee be draw up as a contract and the guarantor be paid £25.