Struggling to prove that you can pay the rent on the property you want to live in? Then you might need a guarantor. Here’s what’s involved.
Many young people ask their parents – or another family member – to act as a guarantor when trying to rent a property.
This typically happens if a tenant is not fully approved by the referencing process.
While it is common among young people, adults with a full-time job could also find themselves in the same situation if they fail the affordability test.
But what does asking a guarantor to support you actually entail? We take a closer look.
What is a guarantor?
A guarantor is someone who signs a document – or ‘guarantor agreement’ – stating that they take joint responsibility for the rent for the property, and will pay it if you fail to do so.
Put another way, if you don’t manage to pay the rent one month, the landlord can legally call on your guarantor to pay up instead of you.
As well as paying any rent arrears, a guarantor may also be required to cover any damage caused to the property costing more than the deposit. The scope of their commitment will depend on what the agreement says.
Who might need a guarantor?
You may need a guarantor if you are a student or young person renting for the first time – or if you are unable to show you can afford the rent. The same might apply if you are unemployed
In all these cases, a landlord will want extra security because they might consider you as a higher risk than other tenants.
How common is it to need a guarantor?
Recent findings from property technology company, Goodlord, revealed one in five people have to rely on help from family or friends to rent a property. (This is based on analysis of 55,000 tenants who applied for a rental property through its platform in 2018).
While there is no industry standard for affordability, Goodlord defines this as ‘spending less than 40% of income on rent’.
Based on this definition, the firm found that 20% of people do not meet affordability criteria, and could not rent without a guarantor.
What does a guarantor need to do?
A guarantor needs to go through the same referencing process as a tenant. This is likely to include a credit check to make sure they are able to pay.
As a general rule, they will need to:
- Be a UK resident (as this makes it easier for the landlord to take legal action if they need to)
- Be employed
- Have sufficient earnings to cover the tenant’s rental commitment
If your guarantor fails this check, you could face a charge for a fresh check. Note that this may be banned when the Government’s new rules preventing landlords and letting agents from charging tenants letting fees kicks in. This is currently set for 1 June.
Tips on renting with a guarantor
- As a guarantor agreement is a legally binding contract, both you and the guarantor should check it carefully. It’s vital you both fully understand what’s involved – and that the guarantor knows exactly what obligations they are guaranteeing.
- Be aware that as soon as the agreement is signed, the guarantor is bound by its terms and conditions.
- If you are renting in a house share with other tenants under one tenancy agreement – known as a ‘joint tenancy’ – the guarantor needs to be aware they might be liable for any rent unpaid by the other tenants – not just you.
- Watch out for fees if you are renting through a lettings agent.
What if you can’t get a guarantor?
There may be situations where a person cannot get a guarantor, such as:
- If you don’t have a friend or family member willing to act as guarantor
- If you no longer have any form of relationship with your parents
- If you are an international student who can’t provide a UK-based guarantor
The good news is, there may be a solution:
- Some universities and colleges operate a rent guarantor scheme. You can find out if your university or college offers such a scheme by searching the website, or speaking to the Students’ Union.
- There are some private companies that offer to act as a guarantor – but you will have to pay a fee. These firms include Housing Hand and UK Guarantor. With these, it’s the private company that enters into the guarantee contract with the landlord. However, they have the right to get their money back from you if they have to make payments to the landlord. Crucially, before entering into such an agreement, it’s important to do your research so you know exactly what you are getting into.
- You may be able to persuade your landlord to waive the need for a guarantor by offering them a larger deposit – or six months’ rent in advance. This may give them a greater sense of security. However, this will depend on you having the money available to make such an offer.
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