Landlords can reject a guarantor if they have a valid reason like if they lack financial stability or are not a UK resident.
Guarantors are used as an option to cover rent if the tenant is unable to pay so the guarantor has to have enough money to be able to do this. The landlord is within their right to run financial checks on the guarantor or ask for proof of income. If they have a poor credit history or lack a stable income or substantial savings, the landlord may decide it is too high risk and reject the guarantor.
If you’re having trouble with tenant sourcing or knowing when a guarantor is needed, talk to our team. At J Property Management, we are property management London experts and help hundreds of landlords understand the legal side of things. Contact us today to discuss your specific needs.
When Can Landlords Reject a Guarantor?
There are certain cases where a landlord may want to reject a guarantor including:
Financial instability
If the guarantor does not have a stable income, is unemployed or retired, the landlord may not deem them financially stable enough to cover the tenant’s rent in the case that they can’t pay.
Poor credit history
If the guarantor has a poor credit history, it suggests past missed payments or financial unreliability. The landlord may reject the guarantor as they may be unsure if they will be able to reliably cover rent payments.
Lack of home ownership
Some landlords may prefer a guarantor who is a homeowner as it can be an indication of greater financial stability.
Retirement
If a guarantor is retired, they do not have a steady income and will need to prove that they have enough savings to cover any unexpected payments. This may be a red flag for some landlords.
Residency
Many landlords may choose a guarantor who is a UK resident for a simpler legal process. It can be reassuring to have a guarantor who lives in the same country in case anything goes wrong or any defaulted rent payments or damages need to be paid quickly.
Why Would A Landlord Need A Guarantor?
It is common for a landlord to ask for a guarantor – someone who agrees to pay the tenant’s rent should they fail to do so. Guarantors tend to be the tenant’s relative or close friend but it could be anyone who is willing to cover payments in the case that the tenant cannot pay.
Landlords have the right to ask for proof of income or conduct a credit check to confirm that the guarantor is financially stable enough to make this agreement. Guarantors will need to have a good credit history, proof of income or a certain amount of savings. If the landlord is not happy that the guarantor has this, they may choose to reject the guarantor.
If the landlord is happy with the chosen guarantor, the guarantor will need to sign a guarantor agreement – a legally binding document that is separate from the tenancy agreement. This will lay out the terms of when a guarantor can be asked for money and the length of the agreement.
When Should A Landlord Use A Guarantor?
It is the landlord’s choice whether they ask for a guarantor or not but here are some examples of when they might want to use one:
- Student tenants
- First-time renters
- Low income tenants
- Tenants with poor credit history
- Unemployed tenants
- Non-UK citizens who have moved to the UK
- Tenants without landlord references
If a landlord believes that they may not have the most reliable tenants, they may want to request a guarantor.
How Can Landlords Check if a Guarantor is Financially Stable?
If a landlord requests a guarantor, it is also advisable to check that they are financially stable enough to cover the tenant’s rent payments if necessary. They can do this by asking for:
Proof of income
Proof of income, via payslips, a letter from an employer or a tax return, can provide evidence that the guarantor has sufficient income to cover the tenant’s rent.
Credit check
Landlords can run a credit check to confirm that the guarantor is financially stable including seeing if they have any missed or outstanding payments.
Proof of home ownership
If it is important for the landlord to have a guarantor that is a homeowner, they can ask for proof that the guarantor owns their own home.
What Are The Disadvantages of Having a Guarantor?
For a landlord, there are few downsides to having a guarantor. Having a guarantor provides extra security for a landlord because it means that, in the case that a tenant cannot pay their rent, the payments are covered by the guarantor. The landlord will get paid either way.
However, one disadvantage to having a guarantor is that it is at the landlord’s discretion. This means that it is their responsibility to ensure that the guarantor is financially stable and provide a legally binding guarantor agreement for them to sign. The landlord would also need to pay for any financial checks they run.
As a landlord, it can be difficult to handle tenancy agreements and guarantor agreements. Working with a professional property management team can help – contact our experts today for advice.
Source Reliable and Financially Stable Tenants with J Property Management
At J Property Management, we’re dedicated to helping landlords source high-quality, financially stable tenants. From conducting viewings, meeting all tenants personally and running thorough reference checks to drawing up watertight tenancy agreements and ensuring compliance, we make it easy.
Whether you need advice about guarantors or are having trouble finding trustworthy tenants, we can help. Contact us today to get started.
