Working with Guarantors

Where the Tenant is in rent arrears or causing damage, the Landlord has more options if there is a Guarantor.
 
The Guarantor has a vested stake in working with the Landlord. The Landlord decides what legal action they will bring against them.

The Section below covers

  • Obligations of the Landlord to work with the Guarantor 
  • How to use the Guarantor to your advantage 
  • Which Court Process to use
  • Mechanics behind suing the Guarantor
  • Common pitfalls
The guarantor MUST be kept informed of Tenant breaches (cc them letters)  or any Tenant failure that may result in the Landlord seeking redress from the Guarantor. The reason behind this is then the Guarantor has an opportunity to intervene and try to mitigate/manage the potential loss to them.  If you have vetted your Guarantor right then they will be worried you are going to sue them and they will have to pay you for you can obtain a court order against them or a charge order over their property. This will have negative consequences on their credit rating.
 
Guarantors and Key Points - How the guarantor will react when you chase them varies - the decisive test, did you accept a valid guarantor who has money and is worth suing.
  • In theory, the Guarantor should be concerned that the Tenant has betrayed their trust and is exposing them to a hefty bill.
  • The Guarantor needs to work with you for you decide whether you will sue them.
  • The Guarantor can apply pressure to the Tenant that you cannot.
  • Provided you can talk to the Guarantor and keep lines of communication open, you can remind the Guarantor that once the Tenant has left the Guarantor can cap the loss. Some guarantors may pay for a deposit for the Tenant to move.
  • You may compromise with the Guarantor. The Tenants owe X thousand but I will reduce to Y provided the Tenant vacates and you pay a lump sum.
  • The Tenant may not listen to you but if Mummy, Daddy or their Employer gets on the Phone saying, "what the hell are you playing at" then the Tenant may start being more responsible.
Note - Harassment or NOT The parent is a Guarantor; you are obliged to inform them of their obligations because the Tenant has not paid. Where the parent is NOT the Guarantor and you contact them to let them know the Tenant has not paid THIS could be argued to be harassment for the other person is not party to the agreement. 
 
Using the Court Process.
 
  • First rule to remember - You cannot sue two people for the same debt. Therefore, if you evict the Tenant on rent arrears (section 8 Notice) you could ask the Judge to grant a money award for the Debt. However you can then ONLY sue the Guarantor once the Tenant has failed in their agreed obligation to pay.
  • Section 8 Notice - You could evict the Tenant for Rent arrears and NOT sue for the money then sue the Guarantor once the Tenant has vacated. 
 
Section 21 Notice - Ideal was but not always possible. Obtain Possession order with the Section 21 Notice as soon as granted. Should the Landlord decide to pursue the matter through the courts then as the Litigant they will have to be able to demonstrate to the courts that they kept the Guarantor informed of such breaches and that the Landlord was reasonable in their actions
The Landlord should also keep a diary of any communication or calls
 
Over recent years, there has been significant press about guarantors who escape their obligations under guarantees. This was generally on the basis that they were able to demonstrate to a court that they did not understand what they were doing when they gave the guarantee. This is why we recommend they sign each page of the Tenancy Agreement to avoid accusations of duress (and also a legal requirement) their signature MUST be witnessed otherwise the Guarantee is unenforceable.
 

What are the mechanics behind suing the guarantor?

    • Assuming the basic case of rent arrears, you can either sue just the Tenant, just the guarantor, or you can bring a joint claim. Which avenue you choose to adopt will depend entirely on your circumstances.

If I have a money order against my Tenant, can I still claim the money from the Guarantor?

    • Technically no. You would be claiming the same money twice. Once you have the order against the Tenant you should give them the opportunity to pay the amount owed in accordance with the court order. If they fail to do so and breach the order then you should pursue an “Enforcing procedure” to recover the outstanding sums. If your attempts at enforcement are unsuccessful, then you will have the right to go back and bring a fresh claim against the guarantor. To avoid this problem it is sometimes a good idea to bring a joint claim against the tenant and the guarantor from the outset.

Are there any pitfalls I should watch out for with Guarantors?

    • Yes. You should not allow huge arrears to build up and then one day shock the guarantor with a phone call or letter saying that they owe thousands of pounds. A judge definitely would side with the guarantor in that case and say you failed to keep them informed of the situation as it developed. As soon as arrears occur you should be writing to the tenant to let them know. A copy of that correspondence should also be sent to the guarantor to ensure that they are kept up to date of the developments of the situation. See Guarantor Notification of Rent Demand & Guarantor Final warning tenant in Arrears
    • The Guarantor signature MUST be witnessed. If the guarantor agreement/deed cannot be signed in the presence of the Landlord or his agent, it can be signed in the presence of a notary or commissioner of oaths. Typical cost to Guarantor(s) should be no more than £10
    • Always obtain photo proof of ID for the guarantor