The role of a student tenant guarantor

Industry Insight June 21st, 2019
The role of a student tenant guarantor

A rent guarantor is someone who agrees to pay the tenant’s rent if they fail to pay it themselves. A guarantor, usually the students parents or guardians will have to sign the contract alongside the tenant. In the majority of cases, guarantors are also accountable for any damages or outstanding bills if the tenant fails to meet their responsibilities.

It is very common for student accommodation providers to ask prospective tenants to provide a guarantor. Over 70% of student accommodation requires a UK-based guarantor.


1

Who can be a guarantor?

As a property manager or landlord, it is up to you to set obligations for a potential guarantor in student accommodation. These are usually either that the guarantor needs to own their own property or they are able to provide that they earn a minimum amount of money.

Particularly when it comes to student tenant guarantors, the guarantor tends to be a parent or family member, although they don’t have to be either. They just need to be able to meet the criteria you have set.


2

What is joint and several liability?

If you let your property to a group of students signing under the same contract, the tenancy contract will come under “joint and several liability.” This means that the tenant and their guarantor are responsible for the tenant’s rent but also for the collective rent of the whole house.

This acts as a safety net for property managers and landlords, since for many students, this is their first time renting. Students are seen as high risk and be less likely to meet rental payments. If one guarantor is unable to make payments on behalf of the tenant, it is the responsibility of the other guarantors to pay their share. By tying the guarantors in to the whole rent amount, the property manager or landlord can feel more confident that rent will be paid.

For example, sometimes students decide to drop out of university or live elsewhere. In this situation landlords can look to the other tenants and their guarantors to cover the shortfall rather than assume the loss.

While this is often seen as necessary to protect the landlord’s interest, it does put your tenants and their parents in a vulnerable position. Students have to decide on who they are living with very early on in their academic year, meaning they may not know each other that well upon signing the contract for the lease.

If you are letting to students, you could consider offering individual liability. This would dramatically increase your property’s appeal, especially since there is now a greater move towards Purpose Built Student Accommodation (PBSA) operating under individual tenancies.


3

Does this still apply for international students?

Yes, and the majority of landlords will want a guarantor who lives within the UK since it would be easier to take legal action against a UK resident. It is often the case that if a tenant is unable to obtain a UK guarantor, they are required to pay a significant proportion of their rent upfront.

Source: Greater London Authority – Student population projections and accommodation need for new London Plan 2017 (amended October 2018)

But there are other options. There are now sites that can actually provide tenants with a qualifying rent guarantor. Using a company guarantor is similar to using a normal guarantor, the only difference is that the tenant is required to pay a fee. They will also have to provide some proof of identification. Once approved, the guarantor company will provide them with a certificate and will inform the property of the successful application. The student can sign a tenancy agreement and move into their accommodation in the same way as any other student.


4

When the guarantor’s liability ends

This will depend on what the guarantee agreement says and what has been verbally agreed.

For instance, you may agree that the guarantor is to be responsible for the duration of the tenancy agreement, even if the rent increases during this period.

The guarantor’s liability will end either when:

  • The tenant serves a notice to end the tenancy
  • There is a mutual surrender of the tenancy between landlord and tenant
  • There is a possession order from the court

If the guarantor does not agree with the terms, they are within their right to ask to change the guarantee prior to them signing the document.


Conclusion

Guarantors eliminate much of the risk that comes with letting to students, since you have a guarantee for if a tenant cannot keep up with rental payments, or if they are unable to pay for damage they have committed against the property.

Letting to students can be a lucrative business and properties located near university campuses are consistently in high demand. There are very few other sectors which face the same levels of consistent demand, so it is often worth the added element of risk to achieve higher returns.


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