A Landlord's Guide To Guarantors For Private Rentals

Landlords and property investors may come across guarantors when renting a property to tenants. Many landlords ask for a guarantor when renting to students or even non-students who have an unstable income. But it can be complicated if you have never asked for a guarantor before or never needed one. I will explain everything you need to know about guarantors as a landlord, including who can and can’t be a guarantor, when to use one, and how to create a guarantor agreement.

Table of Contents

What is a Guarantor?

A guarantor is someone who agrees to cover a tenant’s rent payments if the tenant cannot pay themselves. Often this is a family member or friend of the tenant. Having a guarantor can be helpful when renting to someone who does not have a stable monthly income e.g. a student, someone on benefits or who is unemployed, or someone who has a poor credit score, debtor arrangements, or has become bankrupt.

Ideally, the tenant will be able to pay the rent themselves, but if they can’t, having a guarantor for that tenant effectively ‘guarantees’ that you will still receive the rent payments.

Who Can Be a Guarantor?

A guarantor should be a UK resident who is over the age of 18 and financially stable. They should be able to provide proof of earnings and/or savings, proof of their identity, and have a good credit score. They will need to provide:

A form of ID like a passport or driving licence
Payslips or other proof of income for the last 2 years
Permission for a credit check to be performed

Most importantly: they will need to sign a guarantor agreement agreeing to pay the tenant’s rent or for any damages to the property that the tenant cannot cover themselves.

What is a Guarantor Agreement?

A guarantor agreement is an assurance that a third party, i.e. the guarantor, will provide rent payments and pay for any property damages on behalf of a tenant if the tenant themselves cannot pay. The guarantor agreement stipulates the exact terms of this arrangement and it is signed by the guarantor themselves, the landlord, and a witness.

To ensure that a guarantor agreement is legally binding, then either:

The terms of the agreement must be set out within the tenancy agreement and signed by both the tenant and guarantor at the beginning of the tenancy.
If the guarantor agreement is a separate document and not signed at the same time as the tenancy agreement, it must be executed as a deed and the guarantor’s signature must be witnessed, i.e. a third party must also sign to confirm that they witnessed the guarantor signing the agreement.

A deed is a document that provides more legal certainty than an agreement, as it involves a commitment to perform a certain duty, i.e. covering rent payments when needed. A guarantor agreement should include the date of the agreement, and the exact responsibilities of the guarantor (i.e. are they liable for just unpaid rent or for property damage and legal fees?), how long the agreement should last, how rent increases will affect the guarantor’s liability, and more. Some guarantor agreements include an obligation to minimise losses. This means that if a tenant stops paying rent, the landlord has an obligation to remove the tenant using a Section 8 notice and to re-let the room or property as quickly as possible to avoid incurring more debt for the guarantor.

A guarantor agreement is a binding legal document, but it can be challenged in court if any of the wording is ambiguous, the terms create a ‘significant imbalance’ between involved parties, or if the guarantor was pressured into signing the document. I recommend you seek legal advice or use a template created by a legal professional that you have carefully read and understand completely.

Do You Need a Guarantor When Renting to Tenants?

No, you don’t need a guarantor to rent a property to tenants. As long as you are satisfied that the tenants will be able to cover the rent and any other costs incurred by them living at the property, then a guarantor agreement is not required. Guarantors are commonly used when renting to students, people who are unemployed, on a low income or on benefits, people with poor credit history, or whose monthly income is not stable, e.g. they rely on temporary or contract work.

You can ask for proof of income or a credit check on prospective tenants which can inform your decision on whether to ask for a guarantor or not. If a tenant has a full-time job that provides enough income for them to comfortably pay rent each month and has a good credit score, then a guarantor agreement is probably optional. When renting to a family or couple, bear in mind that one tenant may be responsible for more rent than the other, so if one half of a couple doesn’t work full-time, this is not necessarily an issue if the other tenant earns enough to cover the rent in full.

What if a Tenant Cannot Provide a Guarantor?

As stated above, not every tenant will need a guarantor if they have a stable income and good credit. If however a tenant cannot provide proof of these things and does not have anyone they can ask to be a guarantor, there are other options.

If you are concerned that a prospective tenant cannot cover the rent for the entire tenancy, you can ask for a higher deposit or for them to pay rent 3 or more months in advance. Landlords can also take out Rent Guarantee insurance, which can cover some or all of the unpaid rent, plus legal expenses if required. Some Rent Guarantee insurance policies do stipulate that a guarantor is required for the insurance to be valid, so always check all terms and conditions carefully before taking out this insurance.

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