Rent guarantor’s liability beyond fixed term?

by Readers Question

8:23 AM, 31st December 2019
About 2 months ago

Rent guarantor’s liability beyond fixed term?

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Rent guarantor’s liability beyond fixed term?

I would welcome advice on the following. I issued a tenant with a 6 months short hold tenancy agreement and obtained a letter from a guarantor for any non payment of rent by the tenant. The tenancy has rolled over into a periodic tenancy.

Is the guarantor still liable for any non payment?

My query centres on whether the guarantor liability finishes after the expiry of the 6 month period or is continuous.

Many thanks for any advice.

Philip



Comments

Neil Patterson

8:26 AM, 31st December 2019
About 2 months ago

Hi Philip,

Most guarantees I have seen have been for the term of the tenancy including the rolling statutory periodic term.

What is the exact definition for the term in the agreement and hopefully we can interpret it for you?

Gary Nock

14:36 PM, 31st December 2019
About 2 months ago

I agree with Neil. It all depends on what you have in the letter. We have always had guarantors sign it as a Deed of Guarantee rather than a letter. Far more binding on the guarantor. If the guarantor has agreed to act as a guarantor for the
" duration of the tenancy" then unless " the tenancy" is defined as " the original fixed term and any statutory or contractual periodic tenancy that occurs immediately after" then you are on a sticky wicket. An explanatory letter should have accompanied the letter or Deed stating what being a guarantor entails and the financial liability it places on them. A copy of the tenancy agreement ( also signed by guarantor) should have been sent with the letter / deed prior to signing and also after commencement of tenancy. Finally if there has been an increase in rent during the tenancy then notification of same MUST be sent to the guarantor as if there is a default then they may only be held liable for the orginal rental amount.

Clint

10:00 AM, 2nd January 2020
About 2 months ago

If the guarantor, is responsible for all tenancies whilst renting from you, you must inform the guarantor that a periodic tenancy has arisen and that the guarantor is still responsible for the new tenancy that has arisen.

I once made a money claim from a guarantor where rent was due during the periodic term. The claim went to a hearing and although, one of the clauses read as “agree to pay all monies that may become due to the Landlord according to the terms and conditions of this Tenancy and any other subsequent tenancies”, the judge did not allow for the guarantor to be responsible during the periodic term as, the guarantor was not informed that a new tenancy had arisen. The judge did not even allow me to appeal against the decision.

On searching the internet, you will see that the guarantor has to be informed of any subsequent tenancies.

Michael Barnes

0:39 AM, 3rd January 2020
About 2 months ago

There is a legal argument that the guarantor agreement
a) needs to be a deed, and
b) needs to be entered in to after the granting of the tenancy, and
c) is not enforceable after the fixed term.

But the guarantor may not know this.

My approach is to have a family member as guarantor and name them as a tenant. There is then no doubt that they are liable for the debt, and if real T gets into arrears, the G can give notice to end the tenancy.

Dylan Morris

8:52 AM, 3rd January 2020
About 2 months ago

Reply to the comment left by Michael Barnes at 03/01/2020 - 00:39
I’m not a lawyer but I always thought that legally one of the qualifications to be a tenant is that they have to be in occupation of the property. Not sure how somebody who doesn’t live, and has never any intention of living, at the property can be a tenant.

Kate Mellor

0:19 AM, 4th January 2020
About 2 months ago

The main issue with a guarantee continuing on past the fixed term is that it is potentially limitless. To be enforceable after the fixed term the guarantor needs to have a means of ending their liability which is within their own control should they wish to do so after the fixed term expires.
The RLA offers a very thorough and legally binding Unlimited Deed of Guarantee. It must be signed as a deed (& witnessed) in order to be a binding agreement which endures past the end of the fixed term as it may potentially be enforceable for many years.
The guarantor must have been provided with a copy of the tenancy agreement up front and will only be liable for the rent at the current rate unless a new agreement is signed.
The agreement states the means by which the guarantor can end their liability and what restrictions there are to that action. I won’t go into all the details As it would take too long but it covers all the main issues. The RLA agreement is an UNLIMITED Deed of Guarantee and therefore you won’t have ANY legal issues with enforcement should it be necessary assuming you’ve followed all the correct processes.
If your agreement is a basic one it’s worth using it to try and get paid as the individuals won’t necessarily be aware of its limitations, but I wouldn’t spend money in court on it.
It’s worth the cost of a year’s membership for access to all the documentation alone in my opinion & you won’t find yourself with inadequate contracts the next time around. You’ll also receive a discount on any courses they offer as a member. I highly recommend their Repossession course to all landlords.

Michael Barnes

1:07 AM, 13th January 2020
About a month ago

Reply to the comment left by Dylan Morris at 03/01/2020 - 08:52
It is not a requirement that a tenant lives at the property. Being a tenant means one has a legal interest in the property.


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