Guarantor insurance. Does it exist?

SarahThorpe

Hi all.
Have been asked to act as a guarantor for my son who is a student and moving into privately rented housing with 4 other students. As parents we have all had to act as guarantors but the tenancy makes everyone jointly liable if one (or more) tenant defaults.

Is there an insurance I can get, to cover my losses should the worst happen? While I can afford to cover his rent I would not be able to pay the cost for the whole house. The terms of his lease are making me very nervous but the landlord has all the power due to the necessity for housing.

Many thanks

EdGasket

Just refuse to be a guarantor or write your own terms and tell the landlord take it or leave it; I've done both and manage to sleep at night. Landlords take the p*ss

eddddy

Your son will almost certainly have 'joint and several' liability for his housemates rents (plus any damage they do to the house) - and you, as guarantor, would also share that liability.


There's no insurance that can protect you from this. The only real way to protect yourself is...

Explain to your son the amount of money that he (and you) are risking. Then discuss with him how well he knows his housemates and much he trusts them. And decide if it's a risk that he (and you) are willing to take.

(As an example, if one of your son's housemates decides to drop out of Uni, move out, go home, and stop paying rent - the landlord could decide to sue your son for the rent.)

EdGasket

I had a landlord wanting me to sign up to unlimited liability with one of these 'guarantor' agreements; I told him where to go! Guaranteeing the rent is one thing but insuring his house NO.

The landlord is making the profit; they should bear the risk. Even if a tennant moves out prematurely, the landlord can get another tennant moved in; but what motivation would he have to do that if he got his rent anyway due to a guarantor agreement?

eddddy

EdGasket wrote: »

I had a landlord wanting me to sign up to unlimited liability with one of these 'guarantor' agreements; I told him where to go! Guaranteeing the rent is one thing but insuring his house NO.

The landlord is making the profit; they should bear the risk. Even if a tennant moves out prematurely, the landlord can get another tennant moved in; but what motivation would he have to do that if he got his rent anyway due to a guarantor agreement?

Perhaps you're right - but the reality is that student Landlords typically draw up 'joint and several liability' tenancy agreements and students sign them.

If the OP's son refuses to sign, I suspect the Landlord will just find a different group of 5 students who will sign.

I've heard of parents/guarantors sometimes succeeding in limiting their exposure as guarantors. But their child still has 'joint and several liability'.

Not sure what you mean about insuring the landlord's house. (If the students cause damage they have to pay for repairs. That's nothing to do with insurance.)

Marktheshark

These documents need to be read by a qualified solicitor or legal advisor.
Some are unlimited liability with unlimited periodical tenancy that could run until the death of the guarantor.

Scams by rouge student let sharks are the new wild west.
Many have their eyes on your wallet rather than the rental income.
You do not know the other people, they can charge what they like claiming all sorts of damages.
Many do and will.

This just sign it, everyone else does attitude is not good money saving advice.

It only needs one to drop out and you will be paying their rent and if the deed does not limit the period or timescale, it could be until the end of time.

Seek good legal advice on the wording of this deed.

eddddy

Marktheshark wrote: »

This just sign it, everyone else does attitude is not good money saving advice.

Yes - I 100% agree. Too many people enter into these agreements without understanding them.

As I say, student landlords typically look for 'joint and several liability' plus a parent guarantor.

The student needs to read and fully understand their liabilities under the AST. The parent needs to read and fully understand their liabilities under the guarantor agreement.

The student and parent then need to decide how much they trust their housemates.


Some people may then decide that student house sharing isn't for them - because of the risks involved.


Edit to add...

And I agree that a big problem is that naive 19 year olds sign ASTs (the first major contract they've ever signed) "because everyone else does" without understanding that they are exposing themselves to tens of thousands of pounds of liabilities.

But if you have teenage kids, you will know that often their parents will be the last people they ask for advice on risk, MSE, who they should choose as housemates etc.

EdGasket

eddddy wrote: »

Not sure what you mean about insuring the landlord's house. (If the students cause damage they have to pay for repairs. That's nothing to do with insurance.)

Because I was being asked to cover the cost of all losses that were a direct or indirect result of negligence by my child. So for instance if said child left an electrical appliance on and the place burnt down, I would have been responsible. That to me sounded like I was being asked to 'insure' the landlord's property; not my job and the potential losses were unlimited! One should never put oneself in the position of being exposed to unlimited losses.