Someone who is looking for rental housing may never have heard of a lease guarantor, and for a lot of individuals and households, the idea of having a lease guarantor is not relevant. A rental agreement is most often made between two parties: the landlord and the tenant or tenants. However, in some cases, a lease guarantor acts as a third party to help provide security for the landlord in terms of the rental agreement.
What Is a Lease Guarantor?
The lease guarantor in a rental agreement is someone who signs their name to the contract and agrees to pay if the tenant is not able to pay the rent. Specific clauses of the lease or rental agreement will outline the responsibilities of the lease guarantor, when payment is to be made, and when these responsibilities will become relevant to the agreement. Generally, after a landlord contacts a tenant for payment, he or she will initiate a specific time frame for payment from the guarantor.
Lease Guarantor Arrangements
The lease guarantor in a rental agreement is most often the parent or guardian of the tenant. It stands to reason that most tenants will only be able to persuade a close family member to act as a lease guarantor, because of the responsibilities involved.
Tenants may seek to add a lease guarantor to rental agreements when their income or credit score is not enough to secure them the housing that they want. Tightening tenant assessment practices are causing some tenants to look for a lease guarantor in order to get around the choosy standards of landlords who only want tenants with sparkling clean credit and a lot of income.
Why Add a Lease Guarantor: Credit Problems
When a younger tenant has less than stellar credit, he or she may be in a position to rent a space, but may be rejected due to this technicality. This is a common time when a tenant might seek out a lease guarantor as a solution. Although a rental agreement is not the same as a personal loan, a lease guarantor is a lot like a co-signer for a car or home loan, in that the additional signature allows the borrower to establish a contract despite a lack of technical qualification.
Younger tenants may also have a lack of solid credit history which does not automatically make them a practical credit risk, but may present a technical credit risk that landlords do not want to take on. Here again, a lease guarantor can be useful.
Although many believe that tenants and rental agreements should “stand or fall on their own two feet,” the above ratcheting up of credit restrictions is driving some forms of lease guarantorships that may ultimately be successful if the tenant is a responsible one. Lease guarantors should note that they may be responsible for damages to the space as well as unpaid rent, and that such financial responsibilities are binding on their estate.
The bottom line is that those who have been asked to act as lease guarantors should think carefully before accepting such a role in a rental contract and evaluate the long term results of a situation before signing.