Rental guarantor

YoungBlueEyes

Grumpy_chap said:

ThisIsWeird said:

This guarantor malarkey seems deeply flawed.
Is it really the case, for example, that a tenant being 'guarantored' could simply choose to stop paying their rent, in the knowledge that their guarantor would need to pick up the bill? Indefinitely?! 

Yes.

YoungBlueEyes said:

I can't find it now but there's been a thread on here fairly recently that was basically that.

I linked that upthread:

Grumpy_chap said:

The OP may find this thread worth a read:
https://forums.moneysavingexpert.com/discussion/comment/80524887

That's the very one, apologies and thanks Grumpy_chap.

saajan_12

The point of a guarantee is really for tenants who are trustworthy but have no way of demonstrating that to a stranger (everyone has to start somewhere etc). So the person that does trust them takes on the liability to the stranger LL. However if you don't trust them for more than x time, then why would the LL take that tail risk?

The problem with limiting the guarantor's liability, is that a tenancy isn't time limited in time.. if the tenant remains in occupation, the tenancy continues periodically and the LL cannot end it themselves. They have to go through long notices, court, further waits, which don't have a definitive time period. So the only feasible way would be a clause whereby the the guarantor can either serve notice to terminate the tenancy in some sort of tri-party tenancy, or force the LL to serve notice. This could be either when the tenant fails to pay rent enough times or at will by the guarantor. In either case, the guarantor's liability only ends when the tenant's liability ends, including any rent arrears, damages, court costs to get to that point, but at least it's not indefinitely. 

The pitfall for guarantor's is they often assume they'll get paid back anything they have to cover but they don't think about formalising this, especially for joint & several tenancies. The guarantee covers the full rent not just say your child's share because each of the co-tenants are severally responsible for the full rent. So while the LL can't get involved in the split, if I was a guarantor, I'd insist the tenants sign a bilateral agreement with me to reimburse me for anything from their share that they fail to pay to the LL and that I end up paying. That way psychologically they feel liable and there's no argument if I did have to claim it from them at court rather that relying on what the verbal assumption was about splitting rent. 

DullGreyGuy

ThisIsWeird said:

DullGreyGuy said:

ThisIsWeird said:

This guarantor malarkey seems deeply flawed.
Is it really the case, for example, that a tenant being 'guarantored' could simply choose to stop paying their rent, in the knowledge that their guarantor would need to pick up the bill? Indefinitely?! 
What's to prevent this from happening, say by a feckless child?! If the tenant can clearly afford to pay the rent, so is simply taking advantage to line their own pockets, can the guarantor escape their liability in some way?

If they have a feckless child, part may say what happened to the parenting that made them grow up like that and secondly we are talking adults here not babies and if your parent has failed and raised a feckless kid then refuse to be a guarantor 

Its the same as being joint on any form of finance, you are signing up for the full amount and if you dont want to pay it then dont sign up to it. The only way to escape it would be to default on the payments and wait for the landlord to evict your kid. 

What's more silly is guarantor loans where a bad credit person gets a 40% APR loan which a good credit person guarantees to pay... the former can intentionally not pay and the guarantor pays the full amount. If you're going to do this why doesn't the guarantor get a 8% loan, sub-loan it to their kid/friend and if they do default on their repayments to you then at least the interest is much lower. 


The only saving grace is that letting agents are bad at ensuing the deeds are executed properly and so you have a technicality you can argue. Ideally you'd have it drafted at a maximum 2 years or such but if the landlord would agree to a cap on its duration is another matter. 

I really meant a child that became 'feckless'.

Many folk land on hard times, or go through traumas - it's part of life. This forum has quite a few cases of relationships breaking down, and one party then finding they've been placed in a difficult financial position due to the (often deliberate) actions of their ex. They trusted them at the time, but things can and do change.

That's what I'm referring to. Very few folk can guarantee the life-long integrity of anyone else, family or no. So I think it's unfair - bizarre - that there should be a situation such as this, where the innocent party could literally be held to ransom - indefinitely.

Such guarantor agreements should, I think, have a 'break' clause written in, such as the process of eviction being started after, say, 6, 9, 12 months of tenant non-payment. Or, the guarantor should have the ability to legally challenge the commitment when it's clear the tenant - and/or LL - are taking the piddle. It should be written in to these contracts.

It is surely clearly unethical that a person doing 'the right thing', is then deliberately taken advantage of, with no escape?

Integrity is only one part of it, in most cases the requirement for a guarantor will be a concern of the financial ability for the proposed renter to pay all rents on time. So it will respond in both situations the rationale is when your kid/ex/whoever doesn't get many hours overtime on their part time job or loses their job after the end of its fix term etc.. ie "can't pay" over "won't pay". 

Absolutely no one can guarantee that someone else will never lose their job or struggle to get their next one. The Landlord is just saying they dont want to be the one exposed to that risk and hence wanting someone else to put their hand up and take it on else they'll reject the potential tenant. 

Guarantor agreements can have any clauses anyone wants in it, like any agreement its a negotiation. The problem is people dont tend to negotiate it and blindly sign the one the Letting Agent has prepared which inevitably is weighted to favour their client the landlord. You could easily suggest a 2 year cap, an aggregate maximum of 6 monthly rental payments or anything else which you think is "fair" and the Landlord would be free to decide if that gives them the level of protection they want or if they'd rather a different tenant. 

Being realistic, if you only give a short term agreement then the Landlord is likely to only agree to a short term tenancy if anything and your relative will either have to find a new guarantor afterwards or a new place to live so just pushing the issue a few months down the line

RHemmings

DullGreyGuy said:

ThisIsWeird said:

DullGreyGuy said:

ThisIsWeird said:

This guarantor malarkey seems deeply flawed.
Is it really the case, for example, that a tenant being 'guarantored' could simply choose to stop paying their rent, in the knowledge that their guarantor would need to pick up the bill? Indefinitely?! 
What's to prevent this from happening, say by a feckless child?! If the tenant can clearly afford to pay the rent, so is simply taking advantage to line their own pockets, can the guarantor escape their liability in some way?

If they have a feckless child, part may say what happened to the parenting that made them grow up like that and secondly we are talking adults here not babies and if your parent has failed and raised a feckless kid then refuse to be a guarantor 

Its the same as being joint on any form of finance, you are signing up for the full amount and if you dont want to pay it then dont sign up to it. The only way to escape it would be to default on the payments and wait for the landlord to evict your kid. 

What's more silly is guarantor loans where a bad credit person gets a 40% APR loan which a good credit person guarantees to pay... the former can intentionally not pay and the guarantor pays the full amount. If you're going to do this why doesn't the guarantor get a 8% loan, sub-loan it to their kid/friend and if they do default on their repayments to you then at least the interest is much lower. 


The only saving grace is that letting agents are bad at ensuing the deeds are executed properly and so you have a technicality you can argue. Ideally you'd have it drafted at a maximum 2 years or such but if the landlord would agree to a cap on its duration is another matter. 

I really meant a child that became 'feckless'.

Many folk land on hard times, or go through traumas - it's part of life. This forum has quite a few cases of relationships breaking down, and one party then finding they've been placed in a difficult financial position due to the (often deliberate) actions of their ex. They trusted them at the time, but things can and do change.

That's what I'm referring to. Very few folk can guarantee the life-long integrity of anyone else, family or no. So I think it's unfair - bizarre - that there should be a situation such as this, where the innocent party could literally be held to ransom - indefinitely.

Such guarantor agreements should, I think, have a 'break' clause written in, such as the process of eviction being started after, say, 6, 9, 12 months of tenant non-payment. Or, the guarantor should have the ability to legally challenge the commitment when it's clear the tenant - and/or LL - are taking the piddle. It should be written in to these contracts.

It is surely clearly unethical that a person doing 'the right thing', is then deliberately taken advantage of, with no escape?

Integrity is only one part of it, in most cases the requirement for a guarantor will be a concern of the financial ability for the proposed renter to pay all rents on time. So it will respond in both situations the rationale is when your kid/ex/whoever doesn't get many hours overtime on their part time job or loses their job after the end of its fix term etc.. ie "can't pay" over "won't pay". 

Absolutely no one can guarantee that someone else will never lose their job or struggle to get their next one. The Landlord is just saying they dont want to be the one exposed to that risk and hence wanting someone else to put their hand up and take it on else they'll reject the potential tenant. 

Guarantor agreements can have any clauses anyone wants in it, like any agreement its a negotiation. The problem is people dont tend to negotiate it and blindly sign the one the Letting Agent has prepared which inevitably is weighted to favour their client the landlord. You could easily suggest a 2 year cap, an aggregate maximum of 6 monthly rental payments or anything else which you think is "fair" and the Landlord would be free to decide if that gives them the level of protection they want or if they'd rather a different tenant. 

Being realistic, if you only give a short term agreement then the Landlord is likely to only agree to a short term tenancy if anything and your relative will either have to find a new guarantor afterwards or a new place to live so just pushing the issue a few months down the line

I hope that in the future there will be laws controlling guarantee agreements for properties, which are fair to both parties. I.e. that the guarantor has a way of getting out of the agreement at some point, and that landlords are not left in the lurch without a guarantor when they could reasonably expect there to be one. I'm not a lawyer not a lawmaker, but is it really impossible to draft something that is reasonably fair to both sides? 

MacMickster

There are currently a shortage of rental properties. The situation is likely to get worse if/when no fault eviction is banned.

For as long as there are multiple potential tenants for each available rental property then any change in the legislation to "protect" guarantors will simply mean that those who would only be offered a tenancy subject to having a guarantor will no longer ever be offered a tenancy at all. The landlord will simply go with a safer bet.

RHemmings

MacMickster said:

There are currently a shortage of rental properties. The situation is likely to get worse if/when no fault eviction is banned.

For as long as there are multiple potential tenants for each available rental property then any change in the legislation to "protect" guarantors will simply mean that those who would only be offered a tenancy subject to having a guarantor will no longer ever be offered a tenancy at all. The landlord will simply go with a safer bet.

A change in the law may result in there being many more people who are prepared to be a guarantor. So, swings and roundabouts. 

DullGreyGuy

RHemmings said:

DullGreyGuy said:

ThisIsWeird said:

DullGreyGuy said:

ThisIsWeird said:

This guarantor malarkey seems deeply flawed.
Is it really the case, for example, that a tenant being 'guarantored' could simply choose to stop paying their rent, in the knowledge that their guarantor would need to pick up the bill? Indefinitely?! 
What's to prevent this from happening, say by a feckless child?! If the tenant can clearly afford to pay the rent, so is simply taking advantage to line their own pockets, can the guarantor escape their liability in some way?

If they have a feckless child, part may say what happened to the parenting that made them grow up like that and secondly we are talking adults here not babies and if your parent has failed and raised a feckless kid then refuse to be a guarantor 

Its the same as being joint on any form of finance, you are signing up for the full amount and if you dont want to pay it then dont sign up to it. The only way to escape it would be to default on the payments and wait for the landlord to evict your kid. 

What's more silly is guarantor loans where a bad credit person gets a 40% APR loan which a good credit person guarantees to pay... the former can intentionally not pay and the guarantor pays the full amount. If you're going to do this why doesn't the guarantor get a 8% loan, sub-loan it to their kid/friend and if they do default on their repayments to you then at least the interest is much lower. 


The only saving grace is that letting agents are bad at ensuing the deeds are executed properly and so you have a technicality you can argue. Ideally you'd have it drafted at a maximum 2 years or such but if the landlord would agree to a cap on its duration is another matter. 

I really meant a child that became 'feckless'.

Many folk land on hard times, or go through traumas - it's part of life. This forum has quite a few cases of relationships breaking down, and one party then finding they've been placed in a difficult financial position due to the (often deliberate) actions of their ex. They trusted them at the time, but things can and do change.

That's what I'm referring to. Very few folk can guarantee the life-long integrity of anyone else, family or no. So I think it's unfair - bizarre - that there should be a situation such as this, where the innocent party could literally be held to ransom - indefinitely.

Such guarantor agreements should, I think, have a 'break' clause written in, such as the process of eviction being started after, say, 6, 9, 12 months of tenant non-payment. Or, the guarantor should have the ability to legally challenge the commitment when it's clear the tenant - and/or LL - are taking the piddle. It should be written in to these contracts.

It is surely clearly unethical that a person doing 'the right thing', is then deliberately taken advantage of, with no escape?

Integrity is only one part of it, in most cases the requirement for a guarantor will be a concern of the financial ability for the proposed renter to pay all rents on time. So it will respond in both situations the rationale is when your kid/ex/whoever doesn't get many hours overtime on their part time job or loses their job after the end of its fix term etc.. ie "can't pay" over "won't pay". 

Absolutely no one can guarantee that someone else will never lose their job or struggle to get their next one. The Landlord is just saying they dont want to be the one exposed to that risk and hence wanting someone else to put their hand up and take it on else they'll reject the potential tenant. 

Guarantor agreements can have any clauses anyone wants in it, like any agreement its a negotiation. The problem is people dont tend to negotiate it and blindly sign the one the Letting Agent has prepared which inevitably is weighted to favour their client the landlord. You could easily suggest a 2 year cap, an aggregate maximum of 6 monthly rental payments or anything else which you think is "fair" and the Landlord would be free to decide if that gives them the level of protection they want or if they'd rather a different tenant. 

Being realistic, if you only give a short term agreement then the Landlord is likely to only agree to a short term tenancy if anything and your relative will either have to find a new guarantor afterwards or a new place to live so just pushing the issue a few months down the line

I hope that in the future there will be laws controlling guarantee agreements for properties, which are fair to both parties. I.e. that the guarantor has a way of getting out of the agreement at some point, and that landlords are not left in the lurch without a guarantor when they could reasonably expect there to be one. I'm not a lawyer not a lawmaker, but is it really impossible to draft something that is reasonably fair to both sides? 

Yes, because everyone has their own opinion of fair... as a group of tenants, guarantors and landlords what fair looks like to them and you will not get full agreement within the group let alone across the groups. Inevitably there will be losers and most will think it should be someone else. 

Landlords won't be happy having the guarantor being able to drop out before they can get the tenants out but that is dependent on the speed the courts are working at which leaves them with uncertainty. 


Look at other recent changes... FCA banned discounting new customer prices for Home and Car insurance so it was fairer for renewing customers who were effectively subsidising the discounts. As a consequence those that were savvy and shopping around each year are now paying higher premiums. Ask a customer in each group if the changes were for the better and I'd bet most shopping around previously would say the others just needed to start shopping around rather than the regulatory change. 

RHemmings

DullGreyGuy said:

RHemmings said:

DullGreyGuy said:

ThisIsWeird said:

DullGreyGuy said:

ThisIsWeird said:

This guarantor malarkey seems deeply flawed.
Is it really the case, for example, that a tenant being 'guarantored' could simply choose to stop paying their rent, in the knowledge that their guarantor would need to pick up the bill? Indefinitely?! 
What's to prevent this from happening, say by a feckless child?! If the tenant can clearly afford to pay the rent, so is simply taking advantage to line their own pockets, can the guarantor escape their liability in some way?

If they have a feckless child, part may say what happened to the parenting that made them grow up like that and secondly we are talking adults here not babies and if your parent has failed and raised a feckless kid then refuse to be a guarantor 

Its the same as being joint on any form of finance, you are signing up for the full amount and if you dont want to pay it then dont sign up to it. The only way to escape it would be to default on the payments and wait for the landlord to evict your kid. 

What's more silly is guarantor loans where a bad credit person gets a 40% APR loan which a good credit person guarantees to pay... the former can intentionally not pay and the guarantor pays the full amount. If you're going to do this why doesn't the guarantor get a 8% loan, sub-loan it to their kid/friend and if they do default on their repayments to you then at least the interest is much lower. 


The only saving grace is that letting agents are bad at ensuing the deeds are executed properly and so you have a technicality you can argue. Ideally you'd have it drafted at a maximum 2 years or such but if the landlord would agree to a cap on its duration is another matter. 

I really meant a child that became 'feckless'.

Many folk land on hard times, or go through traumas - it's part of life. This forum has quite a few cases of relationships breaking down, and one party then finding they've been placed in a difficult financial position due to the (often deliberate) actions of their ex. They trusted them at the time, but things can and do change.

That's what I'm referring to. Very few folk can guarantee the life-long integrity of anyone else, family or no. So I think it's unfair - bizarre - that there should be a situation such as this, where the innocent party could literally be held to ransom - indefinitely.

Such guarantor agreements should, I think, have a 'break' clause written in, such as the process of eviction being started after, say, 6, 9, 12 months of tenant non-payment. Or, the guarantor should have the ability to legally challenge the commitment when it's clear the tenant - and/or LL - are taking the piddle. It should be written in to these contracts.

It is surely clearly unethical that a person doing 'the right thing', is then deliberately taken advantage of, with no escape?

Integrity is only one part of it, in most cases the requirement for a guarantor will be a concern of the financial ability for the proposed renter to pay all rents on time. So it will respond in both situations the rationale is when your kid/ex/whoever doesn't get many hours overtime on their part time job or loses their job after the end of its fix term etc.. ie "can't pay" over "won't pay". 

Absolutely no one can guarantee that someone else will never lose their job or struggle to get their next one. The Landlord is just saying they dont want to be the one exposed to that risk and hence wanting someone else to put their hand up and take it on else they'll reject the potential tenant. 

Guarantor agreements can have any clauses anyone wants in it, like any agreement its a negotiation. The problem is people dont tend to negotiate it and blindly sign the one the Letting Agent has prepared which inevitably is weighted to favour their client the landlord. You could easily suggest a 2 year cap, an aggregate maximum of 6 monthly rental payments or anything else which you think is "fair" and the Landlord would be free to decide if that gives them the level of protection they want or if they'd rather a different tenant. 

Being realistic, if you only give a short term agreement then the Landlord is likely to only agree to a short term tenancy if anything and your relative will either have to find a new guarantor afterwards or a new place to live so just pushing the issue a few months down the line

I hope that in the future there will be laws controlling guarantee agreements for properties, which are fair to both parties. I.e. that the guarantor has a way of getting out of the agreement at some point, and that landlords are not left in the lurch without a guarantor when they could reasonably expect there to be one. I'm not a lawyer not a lawmaker, but is it really impossible to draft something that is reasonably fair to both sides? 

Yes, because everyone has their own opinion of fair... as a group of tenants, guarantors and landlords what fair looks like to them and you will not get full agreement within the group let alone across the groups. Inevitably there will be losers and most will think it should be someone else. 

Landlords won't be happy having the guarantor being able to drop out before they can get the tenants out but that is dependent on the speed the courts are working at which leaves them with uncertainty. 


Look at other recent changes... FCA banned discounting new customer prices for Home and Car insurance so it was fairer for renewing customers who were effectively subsidising the discounts. As a consequence those that were savvy and shopping around each year are now paying higher premiums. Ask a customer in each group if the changes were for the better and I'd bet most shopping around previously would say the others just needed to start shopping around rather than the regulatory change. 

This sort of thing is why we have governments. Its their job to work on things like this. No government gets it right, and many governments are appalling. But, that doesn't mean that people shouldn't promote and request better laws that solve problems. Governments are supposed to come up with a version of 'fair' on our behalf. And, if we don't agree with their 'fair' we vote for people we agree with. 

E.g. I would say that deposit schemes have made things much fairer. Not a perfect system by any measure, but better than what was before. 

Personally, even though I did take advantage of opening offers that meant I was probably loss-making for companies a chunk of the time, I don't think that sort of market works to the common good and it made things too complicated. So, I don't miss that situation. Hence, your example doesn't convince me. 

BTW: I never suggested that the guarantors should be able to drop out before the landlord can get the tenants out. At least, not unless the landlord takes an unreasonable amount of time to get the tenants out. 

Grumpy_chap

RHemmings said:

BTW: I never suggested that the guarantors should be able to drop out before the landlord can get the tenants out. At least, not unless the landlord takes an unreasonable amount of time to get the tenants out. 

That would be the effect of the Guarantor have a time limitation.

Perhaps, the solution would be that either the LL or the Guarantor could commence eviction proceedings.  That still has problems, as it creates the position where the Guarantor would result in loss of income to the LL.

martindow

I am surprised that the guarantor does not have a degree of protection as they are an individual dealing with a business (the landlord or their agent).  Guarantors, sometimes naively, sign an agreement with terms that that seem to favour the LL.  This is not a B2B transaction.

Assuming the agreement is watertight, shouldn't the LL be expected to minimise their losses?  Could the guarantor not challenge being over-charged, for instance when a LL doesn't take action to evict the tenant as soon as arrears occur rather than letting it drift and relying on the guarantor.