Acting as a Guarantor

[Ivan]

This is a bit off topic as it is not about Thailand or related to Thai issues but has any one had experience of acting as guarantor on a property lease ?

A family member has asked me to act as a guarantor for a property in the UK they plan to rent.

The form is not clear on how long it lasts but it seems apparent and logical that it lasts for as long as the lease lasts.

What I am woried about is if my circumstances change and I can not act as a guarantor can I cancel my guarantee ?

Or am I stuck with it until the lease ends, I expect the lease will be a recurring type once the intial 12 months is up.

Ivan

[Ivan]

This is a bit off topic as it is not about Thailand or related to Thai issues but has any one had experience of acting as guarantor on a property lease ?

A family member has asked me to act as a guarantor for a property in the UK they plan to rent.

The form is not clear on how long it lasts but it seems apparent and logical that it lasts for as long as the lease lasts.

What I am woried about is if my circumstances change and I can not act as a guarantor can I cancel my guarantee ?

Or am I stuck with it until the lease ends, I expect the lease will be a recurring type once the intial 12 months is up.

Ivan

[rolyshark]

Be very careful.

The exact terms will depend on the respective agreements-the guarantor agreement and the lease (is it a lease or tenancy?).

You will normally become responsible for any loss suffered by the landlord as a result of the breach of any conditions of the lease,not just non-payment of rent/premium etc. You will normally also be responsible for any breach of the lease by any joint lessee where there is joint and several liability. You may not wish to give such guarantee for the non family member lessee.

The terms of recission of the guarantee agreement (by you) are normally fairly limited and would not often allow you to easily get out of it. If you propose standing as guarantor you are likely to be credit-checked in any event and will have to give details of references etc.

I suggest you get a copy of both the draft guarantor agreement,the draft lease and head lease (if any).

[Fireblade]

Its a difficult question to answer as you are most probably feeling obliged to as it is a family member. But, if it was me, i would try and put any obligations aside and dont do it. If the person(s) fail to pay then that debt will be bestowed on yourself. However, I wish you luck in your decision. They obviously cannot afford it and if they hit problems, well, you know the rest.

[Ivan]

Thanks for the advice.

The Guarantee is for a residential tenancy.

Looking through the web Guarantors can have a very rough ride depending on how much the have trusted the individual that they was acting for.

Looking at the agreement they have sent me and the knowledge that I have gained on the internet the big problem is the length of Guarantor ship. Most problems have been guarantors believed they signed for the length of the original agreement and not a re-occurring tenancy which could last years. So I will ask for a clause to be added detailing the exact length of guarantee. Also there is the word "indemnifies" so the landlord has to minimise his losses and not just rely on the guarantor.

Just to give some background my brother has gone through a very messy break-up with his wife involving four kids. Last year the wife decided to go and live with her new boy friend and in effect dumped the kids on to my brother. He rented a four bedroom house which unfortunately the owners now want back so he has had to look for a new property. Because of the messy split with his wife he was left with over £40k of debt which has now financially crippled him and he has now been forced in to the IVA. So his credit rating is shot so unless I want to see him and his kids homeless I did offer to act as guarantor. He does have a well paid job which will easily cover the rent and if he keeps to a budget he should be ok.

I always though the big problems would come from the Thai side of the family !

Besides asking for the agreement to state length of term and the indemnifies bit. I might also ask for the total guarantor amount be set at 6 months rent to not only limit my risk but also give me a value I can work with and set aside (somehow !).

Now for the difficult chat with my brother……………………..

[rolyshark]

I might also ask for the total guarantor amount be set at 6 months rent to not only limit my risk but also give me a value I can work with and set aside (somehow !).

Good luck,but I'd be surprised if you were successful.

If your brother's IVA fails,the remedy is bankruptcy. Guess who the landlord will pursue?

With four children,your brother's expenditure will be flexible,hopefully this was taken into account when drafting the IVA proposals-for example the back to school expenses in September will be significant and child benefit/child tax credit will not cover the additional amounts.

It is a general principle that the landlord must mitigate his loss-in practice that can mean taking action against the guarantor asap after a default,rather than let the default and rent arrears continue to accrue!

One thing you might want to suggest, in the event that you do not successfully renegotiate, is that the landlord take out insurance to cover the possible defaults (such insurance is not available to guarantors). You could offer to pay for the premium,as and a condition,amend the guarantor clause to reduce your liability. That might be cheaper for you rather than have a rolling guarantee when the tenancy reverts to a statutory periodic tenancy. Just a thought... You do need to see the full documentation I suggested previously though.

[Ivan]

Thanks Roly,

Good advice. Not sure how it is going to play out but hopefully the landords/agency may go for a 12 month guarantee. I expect too, asking for a limited laibility will be no go.

Cheers

I'll let you know how I get on..............