Table of Contents
- What is a guarantor?
- Who can be a guarantor?
- When is a guarantor needed?
- What requirements does a guarantor need to meet?
- What information is needed?
- What is a guarantor agreement?
- How will the guarantor sign the guarantor agreement?
- Is a guarantor only liable for unpaid rent?
- Does the guarantor have to live in the UK?
- When does the guarantor’s liability end?
- What happens if a tenant fails to pay rent?
- What is a guarantor responsible for?
- What happens if a guarantor doesn’t pay?
- What if the guarantor defaults?
- How does referencing work for guarantors?
- How does the ID check work?
- How does the credit check work?
- How does the income check work?
- What are acceptable sources of income for a guarantor?
- What if I can’t find a guarantor?
What is a guarantor?
A guarantor co-signs your tenancy agreement and is legally required to fulfil your contractual obligations should you, the tenant, default or neglect to do so. For example, guarantors can be responsible for rent arrears, damage, utility costs, and so on. Guarantors are needed in select cases where the renter is unable to meet affordability requirements during referencing.
A guarantor gives extra insurance or security to the landlord. Therefore, getting a guarantor is one of the ways to secure a tenancy despite not meeting affordability requirements. The guarantor will then have to provide personal information in order to go through referencing. If they pass referencing, they will then be asked to sign a guarantor agreement that confirms their responsibilities.
Who can be a guarantor?
Anybody who meets referencing requirements (good credit history, income that proves affordability, valid ID) can be a guarantor.
When is a guarantor needed?
Renters who are unable to pass the referencing process will need a guarantor. A renter may be unable to pass the referencing process due to a number of reasons:
- No credit or bad credit
- First time renting
- No references
- No steady source of income
- Not enough income or savings
- Not a UK resident
What requirements does a guarantor need to meet?
- ID: Guarantors must provide authentic, government-provided ID
- Credit: Guarantors must not have a history of any current or historic adverse credit
- Income: Guarantors must meet our affordability ratio of 3.0, which requires them to have an income three times the monthly rental share.
Note: You may notice tenant referencing only requires an affordability ratio of 2.5. However, referencing for guarantors requires a ratio of 3.0. This is because guarantors have higher affordability requirements.
What information is needed?
The guarantor will need to provide a government-issued ID, residential history over the last three years for a credit check and proof of income. Guarantors must be willing and able to provide this information to be eligible.
What is a guarantor agreement?
A guarantor agreement is a legal document added to the tenancy agreement to confirm:
- What exactly is the guarantor liable for?
- When will a guarantor be liable?
- How long will they be the guarantor?
- What happens in a joint tenancy?
- Date of agreement
- Names of parties involved (landlord, guarantor, tenant)
- Property address
- Any special terms or conditions
It’s extremely important for guarantors to read the terms carefully. This is the part of the tenancy agreement guarantors must sign, which is referred to as the guarantor agreement.
How will the guarantor sign the guarantor agreement?
PropertyLoop’s referencing partner will send the guarantor a digital guarantor agreement to e-sign.
Is a guarantor only liable for unpaid rent?
It depends on what is listed in the guarantor agreement, which is why it is so important to read the document carefully before signing. In most cases, the guarantor is in effect agreeing to all the obligations you have agreed to. Obligations are outlined in the tenancy agreement but can include– among rent arrears– damage, cleaning costs, outstanding bills, etc. Therefore, should you default or neglect to fulfil any of your contractual obligations for any reason, your guarantor would be liable.
Does the guarantor have to live in the UK?
Yes, it is required for the guarantor to have residency in the UK. This is needed as if for any reason the tenant doesn't pay rent and the landlord has to go to court it will be easier for them to take legal action against a UK resident.
When does the guarantor’s liability end?
Again, this depends on what the guarantee agreement says. Many agreements don’t have a fixed end date, and instead will require the guarantor to be responsible for liability “under this tenancy/agreement.” Because that is so open-ended, guarantors would still be liable if the tenancy is extended or if there are changes made to the tenancy such as an increase in rent.
In those cases, a guarantor can only leave the agreement if both parties mutually agree to end it, the tenant moves out, or with a possession order from the court.
What happens if a tenant fails to pay rent?
Guarantors will be asked by the landlord to honour the terms of the agreement and pay rent. As a result of the guarantor agreement, they are legally obligated to do so.
What is a guarantor responsible for?
Again, it depends on the guarantor agreement, but in general, these are the liabilities a guarantor may be asked to take on:
- any rent money owed (i.e. ‘arrears’)
- costs of any property damage
- outstanding bills
- cleaning costs
- any other costs accumulated by the tenant
What happens if a guarantor doesn’t pay?
The guarantor is legally bound to the guarantor agreement and failure to do so could result in legal action.
What if the guarantor defaults?
Sometimes a guarantor will not be able to pay for a variety of reasons such as if they fall ill, they were robbed, or they lose their job. In these situations, it depends on what the guarantor agreement says. If there no provision for those circumstances then the guarantor will still be liable to fulfil their obligations.
How does referencing work for guarantors?
Referencing for guarantors is very similar to the referencing process for renters, with a couple of key changes. The renter will first provide the guarantor’s contact details. Afterwards, the guarantor will receive an email from our referencing partner to sign-up and complete the guarantor process, which consists of filling out forms and submitting documents. Our referencing partner will link a guarantor portal where all the required documents can be uploaded.
After the documents are received, our referencing party will reference and verify the guarantor’s ID, credit history, and income. The key difference here is that guarantors will have a higher income requirement to reach. While tenants require an income 2.5x greater than the property’s rent, guarantors require an income 3x greater. Referencing will be completed within a week in most cases. If the guarantor is found suitable, they will then sign the guarantor agreement. Learn more about our referencing process.
How does the ID check work?
All prospective guarantors need to provide ID documents that will be checked for authentication. To do this, you will need to submit a government-issued ID card (i.e a British passport or driving license). Unlike with tenants, guarantors do not need to satisfy right-to-rent requirements.
How does the credit check work?
The guarantor must provide the addresses of where they’ve lived in the last three years. Equifax performs a credit check using this information and to confirm your residential history.
If the guarantor has “adverse credit,” they will not pass referencing and we recommend finding an alternate guarantor.
Adverse credit includes bankruptcy, DRO, IVA, or court orders. If the guarantor has paid off the adverse credit, it will take time to see an update in the database.
How does the income check work?
The guarantor can submit multiple, different forms of income. Their income will be assessed to see if it meets affordability requirements. Guarantors have different, higher affordability requirements than tenants.
While tenants must meet an affordability ratio of 2.5x, the guarantor’s affordability ratio must be at least 3x. In other words, the guarantor’s income must be at least 3x greater than the property’s rent.
What are acceptable sources of income for a guarantor?
- Self-employment (including sole traders, rental income and company directors).
- Overseas income.
What if I can’t find a guarantor?
A number of companies and organizations run guarantor schemes renters can take advantage of. For example, if you are a student your university may have a guarantor scheme. Many private companies run guarantor schemes as well.