Guarantors – Unfair Terms in Consumer Contracts Regulations 1991

by Readers Question

9:51 AM, 5th May 2015
About 4 years ago

Guarantors – Unfair Terms in Consumer Contracts Regulations 1991

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Guarantors – Unfair Terms in Consumer Contracts Regulations 1991

I let out one of my properties and the estate agent that dealt with the letting obtained a guarantee. The guarantor is a 20 year old who was a friend of the tenant earning one quarter of the tenant’s salary. The guarantee was drafted by the letting agent so that it continued to apply to any increased rental and/or to any continuation, extension or renewal of the tenancy.

The tenant trashed what was a newly refurbished house, but the AST had expired in the September and we obtained possession by the following January. We couldn’t renew the tenancy because he was in arrears. We have taken action in the small claims court against the guarantor and this is being defended on the basis that the guarantee has fallen foul of the Unfair Terms in Consumer Contracts Regulations 1999.

I was wondering whether it is worth pursuing the claim in light of the terms or whether anyone thinks we would have a reasonable chance of success. The guarantee was witnessed and as I say it was produced by the estate agent not us.

Nicolaunfair



Comments

John MacAlevey

12:05 PM, 5th May 2015
About 4 years ago

Persue the agent for allowing a gaurantor who was bound to fail..negligent.

Ian Narbeth

12:23 PM, 5th May 2015
About 4 years ago

Nicola
You need to get some proper advice (afraid CAB probably won't help as they don't like helping landlords). Without seeing the documents and knowing all the surrounding circumstances it is not possible to say what your prospects are.

Three questions arise: 1. have you also obtained judgment against the tenant, 2. will the guarantor be worth suing as even if you get judgment they may not be able to pay and 3. What exactly is the guarantor alleging was unfair about the guarantee?

If the sum of money claimed warrants it I suggest you consult a solicitor.

The other thing I would do is put the agents on notice that if the guarantee is found to be defective you will look to them as they should have ensured it was properly completed to avoid falling foul of legislation.

Dr Rosalind Beck

12:30 PM, 5th May 2015
About 4 years ago

We pursued a guarantor through the small claims court, got an attachment of earnings awarded and have been receiving £100 per month from his employer. Interestingly, it said on one of the documents we received that the guarantor had to pay us in any month when he earned in excess of £1,600. I thought that this was really high and in the past had considered that if a guarantor earned at least £1,000 per month, we would get a monthly sum agreed for the attachment. I don't know if anyone else knows what the rules are about the amount the guarantor must earn before an attachment will be awarded. This information is interesting to me, but could be useful for the original poster in terms of their argument with the letting agents.

wayne carson

13:17 PM, 5th May 2015
About 4 years ago

Great response Ian, i think point 2 is the most important., Ros i think you must be one of the 5% who actually get any money from the civil recovery route. My experience is the civil recovery route is fragile and leads to a waste of time, money and leads to stress. I use the euphemism of a "toothless Tiger! loud roar but no bite!"
If your guarantor stopped paying what happens then? I'll tell you...nothing. The system will be played to its fullest extent. Forget bailiffs, complete waste of time. Attachment order are probably the only way to go with guarantors. I always talk my landlords out of civil recovery action.

13:33 PM, 5th May 2015
About 4 years ago

Ian

We didn't persue the tenant as he left suddenly and we don't know where he is. The guarantor does work and so could pay in installments. The mother has called me several times as they are very upset and concerned by all this so I do think it will bother them if she gets some sort of CCJ etc. The guarantor has clearly seen a solicitor as the defence has been legally written. There are various claims including saying that we were in breach of contract for letting the property out without heating and in a damp state and that the tenant should have taken action against us! That I feel is clutching at straws. The main defecence appears to be that the guarantee is unfair and falls foul of the Unfair Terms in Consumer Contracts Regulations 1991 because the clauses were not individually negotiated, it is unfair that the guarantor would be on the hook if the rent increased, if the tenant held over under the AST in other words there is no specified end date for the guarantor's obligations. Although I don't think we will win, I've now paid the court fee and feel we should go ahead. If the solicitor who drafted the defence was so sure I don't think they would have thrown in the bits about us being in breach of covenant (which we weren't). The damage caused was just under £4k. The house had been extensively refurbished prior to the tenant's occupation and by the time the tenant left the damage was extensive. The bathroom was black from mould but this was as a result of the tenant not opening the window, he had sublet the rooms, the police were called numerous times for wild parties, a BB gun was found and that explained why the walls were damaged, all the carpets were heavily soiled etc. I am not going after the guarantor for the arrears but for the damage that the tenant caused.

Ian Narbeth

13:41 PM, 5th May 2015
About 4 years ago

Hi Nicola
As you have pursued the claim through the court it might be worth going after the tenant - perhaps the court will allow service of the claim by email or text or perhaps the guarantor knows where the tenant is. Have you asked one of the tracing companies to see if they can track down the tenant? The tenant may not like having a CCJ especially if he wants to (a) rent again (b) get credit or (c) get a mortgage.
In a commercial context the guarantee provisions you mention are fairly normal. How the court will view them in this context I don't know.

14:32 PM, 5th May 2015
About 4 years ago

Reply to the comment left by "Ian Narbeth" at "05/05/2015 - 13:41":

The guarantor's mother told me where the tenant works but he's been very slippery to say the least. Judging by the post that has arrived for him since he left I believe he already has CCJ and really couldn't care a less. I am not sure how he passed the credit test carried out by the letting agent. The guarantor on the other hand is clearly more bothered. I did some research and it appeared to me that I could go after the guarantor without going after the tenant first and I feel I am more likely to get something out of an individual who is bothered rather than the tenant who will probably view this as another badge of honour! I agree that the guarantee provisions are fairly standard but my own view is that they are onerous. I will post in a few months time as to how I get on, I was just wondering how much success other landlords had had with this type of guarantee as I couldn't find anything on the internet.

Dr Rosalind Beck

19:50 PM, 5th May 2015
About 4 years ago

Hi Nicola. We went after the guarantor too, not bothering with the tenants, in the instance I mentioned above. In fact, we have often pursued the attachment of earning route and recovered tens of thousands this way. You have to weigh up if the person is in a reasonably steady job with a decent salary and not likely to move job. This has often been the case with a poor local jobs market. The guarantor I cited above has had £100 taken from his salary each month, but recently it stopped for some reason and we were notified by the court that they had threatened the employer and said that the employer would have to appear in court if they did not resume payments quickly - and the threat worked and payments resumed.
NB. We have also lost thousands over the years - usually because the person is not worth pursuing with no real prospect of us getting the money, but also because in the past we were led to believe that attachments were too much trouble and not worth it. This is not true. It can sometimes take a year before you see a penny, but slowly, slowly, catchy monkey.

8:21 AM, 6th May 2015
About 4 years ago

Reply to the comment left by "Ros ." at "05/05/2015 - 19:50":

Thanks Ros that is really useful to know. As I said the tenant is slippery but the guarantor is seriously worried and so are her parents who sound like decent people. If nothing else it will show these cocky youngesters that they should pay attention to what they are signing. If my 20 year old son were to come home and tell me he had guaranteed a mate's rent I would go mad! I'll post in a few months time with the outcome.

wayne carson

9:20 AM, 6th May 2015
About 4 years ago

A much more balanced response Ros. I agree the situation of the party you wish to pursue is paramount, as well an honest assessment of your personal situation. Are you strong enough to deal with the bureaucracy that is the English legal system? I deal on average with around 20 to 30 inquiries for advice relating to and assistance with pursuing rouge tenants. I would say that in most cases it is sadly a negative prognosis for success. If there ever was a case for good quality rent protection insurance and tenant liability insurance ( which you can make mandatory in your AST) then this scenario is it.
Lets face it a CCJ isn't worth the paper it is written on. You only have to watch the TV or listen to the radio to hear of financial companies that will consider " adverse credit" applicants. so i ask what is the point. Many low income families do not have aspiration of owning high value cars let alone houses. The referencing system in this country is flawed and no-one can can provide a 100% solid guaranteed reference.
I would agree with Ros that pursuit of Guarantors is the more successful and optimistic avenue for recovery. The initial question relating to the unfair contract is not relevant if there is the magic phrase "this is a legal document and if in doubt you should seek independent legal advice before signing" or words to that effect. I have a huge deal of literature that covers unfair terms. basically the law of fiscal demands the key word is reasonable. Are the clauses in your contract reasonable, the test for this is the common man not you personally. I would agree with Ian a solicitor is required here as they will be savvy to current case law and legislation.

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