The Risks Of Being A Tenant Guarantor
Written by The Landlord on 01 Nov 2011Do you know what amuses me? When someone consciously acts as a Tenant Guarantor for their nearest and dearest, and then as soon as they’re required to act upon their responsibility, they try and shamelessly crawl their way out of it because they feel like they’ve been victimised and hard done-by. It’s ridiculous, and it’s pathetic, like watching a beetle on its back.
What is a Tenant Guarantor?
A “Guarantor” is commonly a friend or family member of the tenant and has agreed to vouch for the tenant and accept the liabilities on behalf of the tenant. Essentially, in the event of a tenant being unable to meet their obligations under the tenancy agreement, whether it is for overdue rent, damage to the property or whatever, the Guarantor is legally bound to accept the liabilities on behalf of the tenant. There’s tonnes more information in the Tenant Guarantor Form page.
I regularly receive an annoying amount of emails from teary-eyed mascara-dripping Guarantors asking two of the following questions:
- How can I stop being a Guarantor for a tenant?
- My friend has fallen into arrears, and I’m his/her Guarantor, how do I get out of being liable for the debt?
Let me show you a prime example of what I’m talking about. I received this ridiculous piece of shit email last week:
I’m a guarantor for someone for a rented property. I have just recently found out the reason they needed a guarantor was cause the landlord thought she wasn’t working. She is now in arrears, is there anyway I can get out of being liable for her debt? Please help, I am at my wits end.
I’m sure the lady that sent me the email is a terribly nice person, so I take no joy in calling her a tediously underdeveloped monkey, but unfortunately that’s exactly what she is. The million dollar question is, what the hell did she think she was signing up for when she agreed to be a Tenant Guarantor, and why is she at her wits’ end? It hurts me to assume the following because my faith in humanity is already limited, and the thought of someone being so dim is painful, but I think she’s got her nuts in a twist because she’s expected to take responsibility for what she agreed to take responsibility for. Heaven forbid, right? What a douche-bag.
There’s nothing wrong with being a Tenant Guarantor
Don’t get me wrong, there’s absolutely nothing wrong with being a Guarantor for someone. By all means, be a Guarantor for someone you love and/or trust, just don’t shrivel into a wheezing blubbering mess if you’re actually required to take on the responsibility of being a Guarantor when that’s exactly what you agreed to do. Please, let me know if i’m starting to confuse you with common sense, because I’ll happily hunt you down like a diseased dog and shoot you in between the eyes, and pat myself on the back for eliminating a cockroach. Only joking, that would be harsh. Kinda.
What you should consider before being a Tenant Guarantor
With the objective of preventing this kind of stupidity from spreading much further, I’m going to jot down a list of points for prospective Guarantors to consider before agreeing to anything. If you’re in that position, you should carefully understand what you’re being asked to do, and then consider whether you actually want to do it.
Do you understand what you’re being asked to do?
I swear to God, 90% of the people that are a Guarantor don’t even have a clue what they’re liable for, they’re just happy their helping someone out. Very cute, but dangerously stupid.
To reiterate, a “Guarantor” has agreed to vouch for the tenant and accept the liabilities on behalf of the tenant. Essentially, in the event of a tenant being unable to meet their obligations under the Tenancy Agreement, whether it is for overdue rent, damage to the property or whatever, the Guarantor is legally bound to accept the liabilities on behalf of the tenant.
Fully understand what responsibility you’re taking on.
Can you REALLY afford to pay someone else’s debt (not just hypothetically, but in reality)?
I think the main reason so many people agree to being Guarantors is because they believe they’ll NEVER be put into the situation of actually having to pay the debt of those they trust. They basically think it’s a hypothetical scenario because they’ll never be let down by those they trust. “It will NEVER happen to me”, says the idiot while being struck by lightening.
Unfortunately, the only certainties in this life are taxes and death. A friend and/or family member never falling into arrears is a far cry away from being a certainty.
Consider the implications on your own personal finances if the tenant you’re vouching for DOES fall into hardship. Can you REALLY afford to pay the debt, and more importantly, would you feel comfortable doing so?
In situations like this, it’s always worth considering the worst possible outcome.
To what level do you trust the person you’re being a Guarantor for?
Trust comes in many, many, many layers, and you need to calculate to what level you trust the tenant.
For example, I would trust my work colleague to pick up my Hugo Boss suit from the dry cleaners, but I wouldn’t trust him with in a 10 mile radius of my girlfriend after he’s intoxicated his liver with a bottle of Vodka. Common sense.
Calculate which level of trust you have with the tenant, and if you’re left with concern, maybe that’s your gut instinct telling you to back-the-fuck-off from the situation.
Are you being pressured into being a Guarantor?
From my experience, most Guarantors are either family members or extremely close friends of the tenant. So there’s usually a feeling of emotional obligation pushing us into the direction of being a Guarantor, even if it’s subconscious.
If you feel remotely pressured into being a Guarantor (even if it’s your own moral obligation pushing you, and not necessarily the tenant’s) or there’s a feeling of unease, even if it’s ever so slightly, I would think twice.
Emotional guilt tends to push us into a lot of situations we don’t really want to be in. Yes, we love our friends and family, and we want to do everything humanly possible to help them, but this is one of those situations where rationality is king.
There is zero reward for being a Guarantor
Understand, there is ZERO reward for being a Guarantor. Well, besides from self-satisfaction of helping out someone you love. But who in their right mind is going to count that, right?
But seriously, there is no opportunity for financial gain, it doesn’t even help your credit rating, and it’s not even worth putting on your C.V, and we’ve all put bullshit on that before.
It seriously is one of those things you have to do purely out of love, without the expectations of any returns.
Will you panic/worry/stress if you have to pay the tenant’s debts?
So, assuming your nearest and dearest does rack up a debt that falls onto your lap, how would you feel about it? Like I previously said, it’s always best to approach this situation with the worst possible outcome in mind. If you think it’s going to cause you stress, then don’t do it.
There’s no point in both of you (you and the tenant) being stressed over the same situation. So if taking on the debt of the tenant is going to inflict additional burden on yourself, forget about it.
How strong is your relationship?
I’ve seen best friends of 20 years become enemies over money. It happens all the time. Hell, just watch Judge Judy, most of the cases on that programme involve family members and best friends having a cat fight over money. Great entertainment, but ultimately it’s embarrassing.
Every relationship has their breaking point, and it usually involves a member of the opposite sex and/or money. That’s the kind of world we live in.
If the tenant (your close friend/relation) left you responsible for a pile of debt, would you carry any resentment towards them? If so, don’t put yourself into the situation where your friendship/relationship is on the line. It’s probably not worth it.
Guarantor nightmares
Anyone got any Guarantor nightmares to share?
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12 Comments - join the conversation...
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'The agency informed me yesterday that my friend had defaulted on rent, and then within 2 hours had withdrawn the money from my account'
How did the agency get access to your account?
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@David: Why should the agency give you notice? You signed an agreement saying YOU would be responsible for your friends debts and they are only acting on the agreement you signed. Unfortunately you are now reaping the rewards of being a guarantor without FULLY understanding your legal responsibilities. Hard way to learn I agree and I do have a VERY small and limited amount of sympathy for you - especially at having such a tosser for a friend who would do this to you, but I suggest a visit to your friend to give them a huge bollocking. If they have missed one they will more likely miss more so you need to get this sorted now.
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So how did they use his bank details to withdraw money from his account?
If there is a way of doing this it would be good to know. I have loads of guarantor/tenants/debtors bank details but don't think I can just help myself.
Set up a direct debit without permission?
Third Party Debt Order?
Have you actually done this to a guarantor in the past?
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It would seem logical that if you are signing up a guarantor you would take bank details at the time of signing including getting the prospective guarantor to sign a direct debit mandate in case of default or failure to pay rent etc.
As I said in previous post we probably have only been told half the story. What's the point if you sign a guarantor and then can't get the money from them?
Normally, if drafted correctly, guarantor form would include permission to do what the agency has done but like many people who sign legal documents, very often they do not read the document or read, don't understand it and instead of taking legal advice they sign and then complain when they are actually hit with the charges.
I'm actually really impressed that the agency have taken this course of action (subject to it being a legal transaction of course).
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Amen to that, brother!
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I think its a smashing idea. Unfortunately, I doubt its legal- well worth looking into though*, thanks.
*maybe 'the landlord' can check it out for the good of the landlording community and all that?
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David, could i ask the name of the agency your friend is with ?
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If actually a DD (we don't know because the original poster did not say) then it would be covered by the DD guarantee scheme which would pay the person back if the debit was made incorrectly.
At sign up you would only be agreeing to the use of the DD mandate in the event of a default payment by whomever you are guaranteeing. Very interesting situation that would be even better if the original poster would provide more details and we could prove legitimacy.
Can't see why the mandate would be any different to say one for your utilities payments other than the fact you have to provide the paperwork for your tenant to sign as opposed to a standing order where the tenant has to set it up. (I also thing STO are for fixed amounts whilst DD's are for variable amounts).
By no means an expert here and certainly not advocating the course of action above until unless it can be checked and validated legally.
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The reason for this is because the contract has not ended is has become a month by month contract.
My advice would be to contact the agent/landlord and as them what they intend to do at the end of the 12 months.
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