First time having a guarantor?

by Readers Question

4 weeks ago

First time having a guarantor?

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First time having a guarantor?

I have a prospective tenant who has put forward her mother a guarantor as she has a bad credit rating.

Her mother has an impressive profile on LinkedIn and I think she would be suitable as guarantor.

I have not had a guarantor for any of my tenants before and wondered what other members thought and their experiences were of taking one?

Many Thanks

Martin

Comments

Neil Patterson

4 weeks ago

Hi Martin,

I am a touch concerned for your criteria on taking a guarantor.

Have you or will you be doing a credit check and taking references?

Martin Bailey

4 weeks ago

Reply to the comment left by Neil Patterson at 27/03/2018 - 09:37
I have checked with the existing landlord and his agent. The mother is currently a guarantor and has been referenced by them and found to have a very good credit rating.

Gunga Din

4 weeks ago

Indeed, a guarantor should ideally be vetted for financial sure-footedness just as you did the tenant. A basic criterion usually required is that they should be a home-owner (outright or mortgaged) to demonstrate a degree of financial security.

However, in the area I operate in this qualification is rarely attained. To some extent, simply having guarantor signed up acts as a deterrent to bad behaviour by the tenant. The guarantor should sign a simple form agreeing and signifying understanding of the obligation, and this should be offered in advance so the guarantor has time to think about it/take advice. Some say the guarantor must have sight of the tenancy agreement in order to sign up, otherwise its not valid, but I'm not sure about this bit.

In two cases I have chased a guarantor for unpaid rent successfully, on the mere threat of legal action.

Having said that, full vetting of the guarantor is belt-and-braces.

Ken Smith

4 weeks ago

I suggest you get them credit checked at the very least if nothing else.

Then, if they pass, ideally you should meet them face-to-face too at their home (they need to be home owners). This achieves lots. You can assess them and their home and pick up on any vibes, good or bad. Just common-sense really. Is the house clean, do they seem decent individuals, are they drinking Stella at 11am on a Tuesday morning?

That sort of stuff...

It also lets you get across to them that, presumably, you are a professional landlord. It gives you the chance to sell yourself and build rapport. You are selling yourself too after all - especially if you are going to be charging an inflated rent (I suggest 10% above market rate) ...read on.

Most importantly though it allows you to play out what will happen, by means of subtle story-telling, regarding them not paying up if they fail to fulfil any obligations at any time of the tenancy - and the end.

Courts, Sherriff's, Costs, interest, cosy-life disruption etc... 'Of course, I know this wont happen in this case Mrs Jones...I just have to make things clear to you' - is a good way of delivering the bad news. Just frighten them and alert them - in a polite way - obviously with a smile on your face as you tell them.

I now use this to such an extent that I dont take deposits ever. What a bonus that alone has been. This allows me to charge more rent because it uses the 'DFS' psychological approach of 'how much do I need to pay today to get a sofa now?' People will pay more in monthly payments if they can 'get it now for as little as the industry norm demands'.

Ok, it's a dumb way to live your life - but it's also a very popular one too.

It leaves my new customers more money for tattoos, nose piercings, expensive tequila, white teeth and phones. All the things a millennial (and older tenants) must have these days. They like the idea of that.

I have never heard a new tenant say that they are going to invest-for-future-growth the £800 they would had earmarked for a deposit. In my experience, that's how tenants behave - generally - live for the day.

On my typical 5 year tenancy duration I calculate it gives me more than 4k extra (£800 pa) in rents than a typical rent for the area/house type. All mine too. Versus an option of an £800 deposit which is never mine - it's a no-brainer.

Just as importantly as increasing profits, it avoids an association with faceless deposit agencies and all the hassle that goes with that nonsense. That's another story.

To conclude, don't be rash, make sure the guarantor is 'right' and is smart enough to realise that you will hammer them if they dont fulfil any financial obligations. This is your property after all.

Ignore the do-gooder, tree huggers who believe in giving 'unlucky' people a chance etc - that's bad advice.

Let some other schmuck take those sorts on.

Good luck.

Luke P

4 weeks ago

Having a (homeowner) guarantor is the only way you get a property from me. Deposits are finite, hard to get back and there are consequences for simple mistakes when taking/registering them. Homeowners are much less likely to do a moonlight-flit and have an asset. They're usually relatives and carry a lot of sway and persuasion with the tenant. Do it. It's the future (and has been since 2007). I have never had any account not settled where a guarantor is in place. I have a few hundred properties.

Mike W

4 weeks ago

As others have said - check.
Linkedin accounts can be false.
Even if checked out before - did you see the check? Is it relevant today? Why is the tenant moving? Do you believe the current landlord/agent?
Am I paranoid?
My best example: a really nice student offering her school aged sister as guarantor - sister pretending to be the mother!

Richard Adams

4 weeks ago

Martin, like others have said having done some checks sign the tenant's mum up as a guarantor. I'm only a very small time landlord but having had a guarantor - father for his son - just once I had to go after him for rent owing and got it. No guarantor and I'd have got nothing. He tried to wriggle out of it mind!
What I did learn though was the son had not told his dad he was in rent arrears so effectively dropped dad in it big time. This is not uncommon with perennial bad paying tenants I believe. So in addition to credit checking the mum in your case try and ascertain how strong their relationship is, ie do they talk to each other, and impress upon both that mum should be advised if rent arrears are stacking up.

Yvonne Francis

4 weeks ago

I always take guarantors but I do check they are house owners and one can do this by the Land Register. eservices.landregistry.gov.uk is a good site charging only £3.
You must also ensure the guarantor has been sent the lease as this is the conditions of their guarantee. They can claim they are not liable if they have not seen or understood it. I do everything by email so I have it written down and proof of attachments sent. I certainly as one post suggests would not go and see them as looks can be deceptive and I may be interested but I certainly would not be hood winked by LinkedIn.

Kate Mellor

4 weeks ago

Do your homework regarding the proper paperwork required for guarantors and use a professional agreement such as the one on the Landlord Zone website or something from another reliable source. It needs to be signed as a deed and needs to provide a means for the guarantor to end their liability or it will be unenforceable after the fixed term. The guarantor needs to sign the tenancy agreement too and be given a copy as they are agreeing to be responsible for any breach of its terms jointly and severally with the tenant.


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