At Midwinters, we focus on supporting landlords in ensuring that all aspects of their rental agreements, particularly guarantor agreements, are legally robust and enforceable. This is crucial for protecting landlords’ interests, especially when tenants are unable to meet their obligations, such as paying rent or covering the cost of damages. Here, we provide an in-depth guide on correctly issuing tenant guarantor agreements and ensuring their enforceability.

The Importance of Guarantor Agreements

A guarantor agreement is a commitment by a third party to cover any unpaid rent or damages that a tenant may leave behind. This type of agreement is particularly common in tenancies involving students or tenants with limited financial history. The effectiveness of a guarantor agreement largely depends on its correct execution and the legal enforceability of its terms.

Legal Framework for Guarantor Agreements

Guarantor agreements must be executed with precision to ensure they are legally binding. The key aspects to consider include:
  1. Execution as a Deed
    To be enforceable, guarantor agreements should be signed as a deed. This requires the presence of an independent witness who attests to the signature of the guarantor. Proper execution as a deed is the starting point in ensuring that the agreement is binding.
  2. Clarity of Terms
    The agreement must clearly outline the guarantor’s liabilities. This includes specifying whether the guarantor is responsible for just the rent, or for other liabilities such as damages to the property. Ambiguities in the terms can lead to disputes and potential challenges in enforcement.
  3. Understanding and Agreement
    It is crucial that the guarantor understands the extent of the obligations they are undertaking. They should be provided with a copy of the tenancy agreement and advised to seek independent legal advice. This reduces the risk of claims that the guarantor did not understand the implications of the agreement.

Common Pitfalls in Guarantor Agreements

Several issues can render guarantor agreements unenforceable:
  1. Lack of Witnessed Signature
    If the guarantor’s signature is not witnessed, the document will probably not be recognised as a valid deed, making it unenforceable.
  2. Failure to Provide Relevant Document
    Guarantors must have access to the tenancy agreement and understand their liabilities under it. Failure to provide these documents can lead to the agreement being contested.
  3. Expiry and Variation of Guarantor Agreement
    The guarantor’s liability is generally limited to the duration and terms of the initial tenancy agreement. Any changes to the tenancy, such as a rent increase or extension beyond the initial term, require explicit consent from the guarantor. Without this, the guarantor may not be held liable under the new terms.

Ensuring Enforceability

To ensure that a guarantor agreement is enforceable, landlords should adhere to the following practices:
  1. Proper Execution
    Ensure that all guarantor agreements are executed as deeds in the presence of a witness.
  2. Full Disclosure
    Provide the guarantor with all relevant information, including a copy of the tenancy agreement and any other pertinent documents. This helps guarantee that the guarantor is fully informed about their obligations.
  3.  Renewal and Variation
    If the tenancy agreement is renewed or altered, ensure that the guarantor agrees to these changes in writing. This may involve signing a new guarantor agreement or an amendment to the existing one.
  4. Legal Advice
    Encourage guarantors to seek independent legal advice. This can help protect landlords from claims of undue influence or misrepresentation.

Addressing Unfair Terms

Under the Consumer Rights Act 2015, terms in guarantor agreements must be fair. Unfair terms might not be binding on the guarantor. Examples of potentially unfair terms include:
  • Obligations that extend indefinitely beyond the fixed term of the tenancy without the guarantor’s explicit consent.
  • Terms that significantly alter the guarantor’s liability without their consent.

Conclusion

Guarantor agreements are a key security measure for landlords but must be handled with care to ensure they are enforceable. At Midwinters Solicitors, we specialise in drafting, reviewing, and advising on the enforceability of guarantor agreements to ensure that landlords are fully protected. Landlords should always seek professional legal advice to navigate the complexities of these agreements effectively. For expert assistance, landlords are encouraged to contact Midwinters Solicitors, where our dedicated team is ready to provide comprehensive support tailored to each unique situation.
For further guidance or to discuss specific issues related to guarantor agreements, please contact John Keddie at Midwinters Solicitors in our dedicated landlord and tenant disputes section.