Parental Guarantees

[jimtim]

I am thinking of asking my student tenants for parental guarantees . The tenancy would be joint one between five students . Is there any way the parent can just guarantee their own childs rent or would this contradict the fact the agreement is a joint tenancy and make it unenforcable ?Can anyone help?

[GPEL]

Joint & several is all for one and one for all. Therefore the guarantor is underwriting all of them and their obligations under the tenancy agreement. Set up individual tenancies if possible and lower the risk. Industry norm is for each student to have a guarantor.

[Simon Dewsberry]

In my experience parents rarely question this !(i know i would ...as i would not be prepared to go gaurantor on 4 other people, as well as my own child !!)

But if you get problems just insert "20% of any amount payable" on each one.....

The gaurantee is a stand alone agreement although it refers to and is applicable to the AST joint or otherwise......

Not a legal beagle but that is good enough for me ...........

There is no way i would volunteer to do split ast's on a student house unless i was forced to ...far easier to let as one unit and remove all problems with bills, communal area responsibility, garden care, and fallouts, also makes rent arrears easier to manage and collect as it will be Joint and several(very helpful when one wont pay to have the other 4 on side as they get the bill!!!!!)...........also if on single ast's you will be responsible for Council Tax & sorting out all student exemptions certs ...proof of full time ed , proof of course attendance --.....NOPE keep it on a single ast .......

Matt you still out there for this one ....

Simon

Ps if they wont pay as G then just threaten them with a DC HAHA (just for Gareth) ...might make that part of my sig HAhA LOLOL

[GPEL]

Depends on how the property is configured. Your returns are maximized with 5 individual lets in 1 property and actually less problematical for lots of reasons. However, if you are just giving 5 students who know each other your house to share then your risks increase. Students, under 21, should always have a guarantor. It also depends on who you class as students. In the early 90's I was classed as a student at university, in my late 20's, only paying student rate poll tax, yet on full pay. No way would I have needed or given a guarantor. Once again I was classed as a student 10 years later when doing an MBA. Bottom line is minimize your risks taking into account individual's circumstances. If your students are young, at college full time, and not earning a wage, the set up an AST for each, with each providing a guarantor, which is usual for mainstream student lets.

[Matthew]

Hi Jim/Tim?,

I rent all my places on a room by room basis.

As Rodent says, this is alot more work & you will have to pay for the bills, especially annoying if you estimate the Gas bill should be £40 per month and starts costing £100 per month (and when you go around there, the property is empty but heating on!!! :-( ), you will not be able to realistically charge this to the tenants, so I now have high estimations of energy costs for these.

You can also imagine, if you have a lot of these properties, the amount of paperwork you have to keep on top of, but worth it for me as I get more money for it (e.g. one property I have would rent for £1,200 as a unit, but £1,500 on room-by-room basis) and I beleive it is actually lower risk.

As GPEL eludes to, if they are all friends, they could all boycott paying rent due to any number of reasons, & I cannee afford for such big amounts to be owing. I think it is easier to deal with them on an idividual basis as it is less messy chasing rent. Also a room vacant for a month is not as costly as a whole property vacant for a month, & I would also say that it is probably easier to find tenants for 1 room than for a 5 bed property, for me there are more individuals looking for a room than groups of 5 people.

I would say that if the rent you will make will be the same if renting as a whole unit or on a room-by-room basis, I would go for the whole house, but depends what you are after:

Less work & higher risk,

or More work & lower risk.

Going back to the original question, I agree with Rodent that the Parents probably wouldn't question signing for the whole property (stupid, but I know a few people who have come a cropper doing this), so could just try that and change to 20% if they query it.

A note though, they are only signing up to be guarentaur for the 6 month period, they will have to sign more forms after that period is up. Most of the tenancies go to periodic and then no new Guarentaur form is filled out = Risky on Student Lets!

Regards,

Mat.

[GPEL]

I would typically expect a guarantor to be earning 3 times the annual rent as a minimum. Finding someone is less likely if it's for the full rent of the house, not individual tenancy agreements.

[Simon Dewsberry]

A note though, they are only signing up to be guarentaur for the 6 month period, they will have to sign more forms after that period is up. Most of the tenancies go to periodic and then no new Guarentaur form is filled out = Risky on Student Lets!

If your G agreement is any good it will stand up for the duration of the occupation or tenancy period ...even when it goes periodic...what is the point in having one that just covers the "initial fixed term" ???

I would typically expect a guarantor to be earning 3 times the annual rent as a minimum. Finding someone is less likely if it's for the full rent of the house, not individual tenancy agreements.

Typically yes,BUT if G has huge debts to service and a massive mortgage this will render him useless as a G so full ref should be done on as on T with full breakdown of outgoing obligations....(tenantref.co.uk or similar...)

[GPEL]

Guarantor expiry of obligations at end of fixed period has already been tested in law and not overridden by own contract clause. I think the point is that if tenant stays in the property the perpetual guarantor obligation expires as the property is "easier" to recover once the fixed period ends; not that I agree with it.

Of course fully reference guarantor, but industry standard is for them to earn minimum of 3 times annual rent. No (legal) referencing process in world is that good it analyses other undeclared outgoings, whether tenant applicant or guarantor. Have to draw a line somewhere.

[Simon Dewsberry]

Well Well Well !

Thank you GPEL that is a new one on me ! i thought it was for duration of tenancy ie until they leave ....i have collected from G one year after ast went periodic ..after G went to CAB to check validity and position ...she did check because they wrote to me ...great to know CAB got it wrong in that case though !!!!!!!!!!! was around 2 years ago ...

"Tenantref" ask for CC balances, loans and overdrafts to be declared, verify income, do a credit search etc.. and then give a suggested "safe" rent limit or "credit" limit and do far more then your average reference ....check them out ...personally cant find anyone to match their comprehensive service ......or price ....

Although i do agree if someone wants to hide something they will; and you do have to draw a line somewhere.

S

[GPEL]

Rodent

Interesting that tenantref takes the applicants word for self-declaration of their outgoings. I think most major referencing agencies don't and over time have developed min income criterias as a general standard for risk assessment.

Cherish your local CAB if they decided in your favour on this.

[J4L]

This broaches an interesting topic with regard to guarantors and some clarity on it if anyone has it would be welcomed.

I myself was under the impression that once the original agreement moves onto a Periodic Tenancy that this is just an extension of the original agreement and not a separate agreement thus still holding the guarantor liable for the duration of the tenancy.

I thought to 'get out' of this the Guarantor had to put this in writing. This would then alert the LL who could then decide which route to go down with the Tenant.

Or have I dreamt this haha

[Matthew]

I remember people on this site saying that it is only valid for the term of the contract. I guess it's all to do with the wording of the Guarantor agreement, but when it arised I'm sure the concesus was that the person was not liable after the initel fixed period.

[Simon Dewsberry]

Interesting that tenantref takes the applicants word for self-declaration of their outgoings

Have a feeling that credit search that they do will turf out balances ????as per search Lenders do when applying for Mort etc ...but not absolutely sure of this !

Simon

[GPEL]

It's good if this is possible but what are the standards for then assessing affordability. I have 5 credit/debit cards and borrowings all over the place always paid on time. A large rent would be easily affordable but my circumstances and ability to pay the rent would be difficult to assess based on this and other incomings/outgoings. I assume it all goes in to the pot with everything else for an overall assessment.

[Simon Dewsberry]

As they only get a "snapshot" of overall position i guess as long as you service all debts on time and total O/S is within income parameters then i guess this is all they can do ......!

but you are right as they could take out a £50k loan next week !

S

[SPEEDTWIN]

I know this is a old post but i would like to add that whoever is a guarantor and signs the guarantee must be given a copy of the AST contract as well at the same time otherwise it will be void.