In residential tenancies, a guarantor is a third party—usually a family member or friend—who agrees to take legal and financial responsibility for the tenant’s obligations if they fail to meet them. Note that there are companies who will provide appropriate guarantor insurance, where required.
Purpose
Landlords typically require a guarantor to mitigate financial risk and provide an added layer of security. This is common when a prospective tenant:
- Has a low credit score or limited credit history.
- Has a low income or fails an affordability check.
- Is a student or young person with no rental history.
- Is new to the country and lacks a local credit profile.
- Has a history of rent arrears or County Court Judgments (CCJs).
Requirements
While criteria can vary by landlord or letting agent, common requirements for a guarantor include:
- UK Residency: This ensures the landlord can easily pursue legal action within the same jurisdiction if needed.
- Financial Stability: Guarantors must often demonstrate an annual income of at least three times the annual rent.
- Credit Check: Landlords will perform a credit check to ensure the guarantor has a history of financial responsibility.
- Homeownership: Many landlords prefer (or require) the guarantor to be a homeowner, as they have a tangible asset that can be secured against.
- Legal Agreement: The guarantee must be in writing and signed by the guarantor, often in the presence of a witness.
Alternatives
If a tenant cannot find a personal guarantor, they may consider:
- Rent in Advance: Offering to pay 6 to 12 months’ rent upfront can reassure landlords. (Although the Renters’ Rights Act, bans taking rent before the tenancy is signed, and prohibits clauses requiring early or lump-sum payments, it does not prevent tenants making over payment.)
- Commercial Guarantor Services: Companies like RentGuarantor provide professional guarantee services for a fee.
- Higher Deposit: Offering a larger security deposit (though this is strictly capped by the Tenant Fees Act 2019 in England).
- Rent Guarantee Insurance: Landlords can purchase insurance to cover potential defaults, which may remove the need for a physical guarantor. (Failure to meet conditions voids claims. )
- Employer Guarantee: Some employers may act as a guarantor for staff, particularly those relocating for work
