Show caution when asked to be a guarantor

Show caution when asked to be a guarantor

Show caution when asked to be a guarantor

First published in News

By John McNulty, Solicitor with Turpin & Miller

It sometimes happens to a lawyer that personal circumstances arise which match those of a client but it is not always the case that the advice that you give to the client is  mirrored by the actions you take yourself.
This came to light for me recently, in connection with being asked by my daughter to sign a guarantee for a tenancy for a shared house in London. She is moving in with three friends.
My advice to people who are being asked to sign as guarantors, is to be cautious.  Many landlords use guarantors to ensure that someone with money will pay the rent in the event that the tenant defaults or damages the property. This is most often associated with the student market, but may also be used for any tenant who a Landlord thinks may struggle to pay the rent or otherwise fail to look after the property in a proper manner.
One of the big issues for guarantors for shared houses such as student accommodation is the fact that in tenancy contracts with more than one tenant, each tenant is jointly and severally liable for the whole rent and for any damage to the whole property, unless it is specified otherwise. This is one of the first clauses that a proposed guarantor must check.
What this means is that if there is one single agreement to cover the entire house, each guarantor is responsible in theory for the entire rent. The landlord can sue any party to the agreement to recover losses.
If, for example, the landlord’s new three piece suite and Axminster carpet are destroyed following a party, it is open to the landlord to pursue one single guarantor for the full amount of the damage, even if that particular guarantor’s son or daughter was not even present when the damage occurred. It would also apply if your child was fully paid up for her portion of the rent but one of the other sharers fell on hard times and got behind with her share of the rent. You as guarantor would be liable for that unpaid rent. That is what the phrase joint and several liability means. The landlord can sever the liability and pursue one party only even though that person may have been entirely innocent.
My advice to anyone who is being asked to sign as a guarantor is to ensure that the guarantee Aagreement is specifically related to your child only and that the rent and the liabilities for the property are specified as individual to each tenant, rather than jointly and severally. 
The next point to check is how long the guarantee is to last for. Most people who sign a guarantee think that they are signing for the period of the agreement. Ordinarily this would be for six months or one year. However, often tenancy agreements continue after the period of the fixed term on what is known as a month to month basis and may indeed extend for a lengthy period. The guarantee needs to be checked to ensure that the guarantor knows whether they are being asked to cover any extension or carry over of the Agreement.
The difficulty that arises is that it is a seller’s market and the agents may refuse to countenance any amendments to their standard guarantee documents.
Real life can of course be different. We want to help our children out. We trust our children.  Trust is everything and the emotional pull is in the direction of being a guarantor and getting your child that house.

Comments (1)

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2:07pm Thu 23 Jan 14

Lawyergirl says...

Great article , John, really inspiring!!!!
Great article , John, really inspiring!!!! Lawyergirl
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