What Happens if I Can’t Find a Guarantor?
Finding a new home can be a stressful time, seeing renters navigate dozens of rental opportunities, be subject to comprehensive background checks and financial scrutiny, only for the ideal opportunity to hinge on your ability to find a guarantor. For many first time renters this may seem like an insurmountable challenge but here will will explain what is a guarantor and what to do if you cant find a guarantor.
What Is a Guarantor?
Essentially a guarantor is an additional party to the traditional tenancy agreement upon the request of the rental property owner. Whilst the term will undoubtedly ring in the ears of all students, a landlord can request any aspiring renter to obtain a guarantor before proceeding with a tenancy agreement. Requesting a guarantor is a safeguarding measure implemented by the landlord that puts in place a party that is legally responsible to pay any debts on behalf of the tenant. Simply put, if a resident of the rental accommodation is unable to pay their rent, the guarantor becomes liable for this amount and is legally bound to cover the payment.
Making more rental opportunities accessible to renters, having a guarantor ensures that rent arrears are not accumulated and the landlord can depend on receiving any expected rental payments, dispelling any fears of eviction, debt and deposit disputes.
Whilst being a guarantor is most commonly associated with covering any missing rental payments and preventing the accumulation of rental arrears, this is not the only purpose of a guarantor. Once the agreement has been signed the guarantor will be liable to uphold a number of different obligations outlined within the tenancy agreement. If after the final inspection of the rental property extensive damage that exceeds fair wear and tear has been revealed, not only will the tenant not be entitled to receive their full security deposit, but the guarantor will be required to pay for the costs of any repair, replacement or remedial work, if the costs exceeds the amount taken for the deposit. Of course the number of situations in which a guarantor could become liable for a payment to the landlord demonstrates that this is not to be taken lightly and neglecting to fulfil the legal obligations of a guarantor can result in the owner of the rental property, or lettings agency taking legal action against the guarantor for noncompliance, making it a far more costly affair.
Who Qualifies as a Guarantor?
When looking for a guarantor, tenants will most commonly turn to close friendly or family members to fulfil this role; this provides a level of trust and transparency as the guarantor will be more aware of the tenant’s ability to meet each rental payment. However, due to the burden being placed on the guarantor, this cannot simply be anyone close to the tenant as they must demonstrate the financial capability to cover any missing payments. With this in mind the guarantor will often be subject to an assessment similar to that of the tenant referencing process; evaluating their employment status, income, credit score and history, alongside if any county court judgements have ever been issued against them.
How Long Is a Guarantor Liable?
As mentioned a guarantor is only held accountable for the individual terms of the tenancy agreement. With this in mind if the landlord wishes to renew the tenancy agreement with the tenant as a new tenancy agreement would have to be signed, this would not only absolve the existing guarantor of their legal obligations, but they would have no requirement to sign the new agreement being proposed. It is also worth mentioning that if there is a break clause in the tenancy agreement, or the fixed term is brought to a close early through a mutual agreement between the landlord and the tenant then the guarantor would again be absolved of their responsibility. However, if none of these instances occur then the role of the guarantor would come to an end once the rental period expires.
Do You Always Need a Guarantor to Rent?
Is it important for tenants to note that you will not always need a guarantor when looking to rent your next home. Typically landlords will only request that a prospective tenant seek to obtain a guarantor if it is suspected that they may not be able to maintain the consistent rental payments outlined in the tenancy agreement. Whilst needing a guarantor is synonymous with landlords that let to full time students, it is common practice for rental property owners to request a tenant secure a guarantor if they have a poor credit history or low credit score, have a fluctuating employment history and income, are receiving housing benefits or are otherwise concerned about the occupant accumulating rent arrears.
Using a Guarantor Company
For tenants that are unable to call upon a close relative or friend to be their guarantor, it is possible to employ the services of a private guarantor service, essentially allowing the tenant to obtain a guarantor for a fee. Of course this allow the tenant to pursue a rental opportunity unchallenged, whilst giving the landlord the peace of mind there will be no rental arrears to deal with.
However, to say that these services come at a cost is an understatement, often coming at the expense of hundreds of pounds to the tenant, adding another high financial barrier to their rental journey. Companies such as Housing Hand also allow the tenants to split this cost over multiple months, but with these fees being billed at a minimum of £42 each month, it is still an exorbitant premium to ask of full time students or those in receipt of financial support, potentially making this unviable for some renters. In some cases the amount that the tenant is charged for the service will also be dictated by the amount of rent they must pay, with higher rental obligations to the landlord coming at a greater cost to the tenant for this security.
It is worth mentioning that many of these private guarantor services will request that the aspiring tenant is able to obtain a co-signer before they agree to cover the tenant. Whilst this may initially seem harmless this move allows the company to avoid subjecting the co-signer to the same rigorous financial scrutiny as a traditional guarantor or tenant, meaning that despite the tenant and the co-signer being label to repay any sums that the guarantor company pay out, neither party may be in a suitable financial position to do so if the tenant is experiencing financial difficulty.
University Guarantor Schemes
As mentioned, landlords will typically seek that a tenant obtains a guarantor in the cases that they are unable to demonstrate a regular income, consistent employment, a credit history and references from previous landlords; it is highly likely that in most cases full time students will be unable to tick the majority of these boxes. However, if a student is successful in their application, the university itself, or a scheme it employs on its behalf, will act as a guarantor for the student. Typically these schemes will cover international students as they will have greater difficultly sourcing a reliable guarantor based in the UK. However, this is not always the case and some schemes will accept applications from any full time student, albeit at a slightly increased fee. It is worth noting that the applicant cannot already be indebted to the university and if they have previously lived in student halls, be able to produce a reference in their favour.
If a student is successful in their application for a university guarantor scheme they will find that they will only be covered up to a set amount or rent, with the tenant having to prove they have sufficient means of making the agreed upon rental payments. Students will typically be charged a one off fee or percentage of their rent al commitment in exchange for the service.
University Bursaries and Scholarships
Unfortunately this will not be accessible to all students and will still leave many having to negotiate paying rent in advance or higher rental charges. If a student is left in this situation and is completely unable to source a guarantor within the UK, they may still be eligible for support from their university. Most universities will offer financial support to students in need; however this is not intended for down payments on rented accommodation. There are however, numerous bursaries and scholarships that a student may be eligible for to help them secure a tenancy and the confidence of the property owner, allowing student tenants to pay deposits and rent in advance.
With this in mind there are a number of foundations that will offer support to care leavers and full time students that are not in contact with their parents. Specifically through the Unite Foundation, a successful applicant would be eligible for three years of accommodation throughout their undergraduate studies, free of charge.
Pay Rent in Advance
Of course, this is a rather direct solution, allowing the prospective tenant to instantly quell the landlord’s apprehension, but if a tenant is able to offer the landlord rental payments before they move in this will offer the property owner financial security and dispel rent arrears for a number of months. Typically most landlords will request several months’ worth of rent to be paid in advance, and any absence of a legal restriction on the amount of rent that has to be paid in advance, this may unfortunately be out of reach for some tenants.
Rent Guarantee Insurance
Whist this should be considered by tenants that are unable to find a guarantor as more of a last resort, it may be worth asking the future landlord if they would consider taking out rent guarantee insure. As this would come at an extra cost to the landlord this would only likely work if you were to cover this fee through a slightly increased rental payment. However, this may only make the situation worse as now not only would they proceed into a tenancy without a guarantor, but the tenant is now paying an even higher rental fee. With this being said most policies will still require the tenant to provide the landlord with some form of reference in the absence of a guarantor and whilst this may be viable for those with reliable employment, this will not be the case for many full time students.
Establish a Periodic Tenancy
Far from an ideal outcome, but still a suitable compromise between the landlord and tenants nonetheless, if both parties of the rental agreement were to enter a periodic tenancy. Often called rolling or statutory tenancies, as the name suggests these forms of agreement automatically renew each month. Typically these are a result of the tenant wishing to remain in the property at the end of the original fixed period, but neither the landlord nor resident wish to renew a tenancy agreement. In such an instance neither party would have to do anything for a rolling tenancy to be in place, however, this would have to be stipulated from the outset if a guarantor cannot be found. Once again, tenants may have to offer the landlord a higher rental fee as an incentive to put the rolling tenancy in place, but it is also worth mentioning that since rent is paid in advance and landlords are able to reclaim their property much faster; rental arrears become far less damaging to each party.
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