References and Guarantors

Landlords should interview prospective contract-holders carefully to assist in choosing one who will be trustworthy and reliable. Taking up references from prospective contract-holders, current or previous landlords, employers and banks can help to inform the contract-holder selection process.

Some landlords might also use a tenant referencing service to make checks and inquiries of a prospective contract-holder on a landlord's behalf. Many companies provide services such as this, and they can be found online or via insurers or landlord associations.

As part of the pre-tenancy referencing/checks, it is suggested landlords ask the successful contract-holder to provide details of a close family member or friend who you can contact in an emergency or if the contract-holder leaves without notice.

It isn't easy to obtain references in some niche markets, such as student lettings, because this will be the first time a contract-holder has lived away from home. To offset this risk, some landlords ask for guarantors where a parent or friend guarantees to meet the cost of unpaid rent and damage.

Guarantor

A guarantee is expressly allowed as a form of security under an occupation contract (s.43(1)(b)).

A landlord will often request a guarantor if references prove unsatisfactory or if income is low relative to the proposed rental amount.

In addition, many landlords require a guarantor in all cases irrespective of referencing — typically in the student market.

You can request conditions that the guarantor meets, such as a minimum income or being a homeowner, which can be proven by a land registry check.

Guarantors would typically be referenced, and ID checked the same way as a contract-holder.

A guarantee agreement can either be a separate document or in a guarantee box within the written statement of the occupation contract.

There must be some form of consideration for any contract to be valid. With a guarantee agreement, there is no service provided in exchange for a fee, and as such, on its face, there is no consideration. However, suppose the guarantee agreement is signed before the contract is entered. A term explaining the consideration is that you will grant a contract to the prospective contract-holders. In that case, that should be sufficient consideration for the guarantee to be a valid contract. Otherwise, the guarantee agreement will need to be made as a deed, and the signatures witnessed.

If a substitute contract is provided to contract-holders, you should also renew any guarantee agreement at the same time.

A guarantee agreement which does not contain any explicit clause expressing that it continues beyond the contract fixed term will end upon expiry of the term.

If the contract-holder defaults in paying the rent or breaches some other obligation of the contract, the guarantor can be required to pay, which gives the landlord an alternative means of enforcement of the occupation contract.