In residential tenancies, a guarantor is a third party usually a family member or friend who agrees to 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: 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:
Employer Guarantee: Some employers may act as a guarantor for staff, particularly those relocating for work
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. )
