A prospective tenant could suggest paying for a rent guarantee and legal expenses insurance policy. Landlord Rent Guarantee Insurance covers any rental loss or damages inflicted by the tenant. It’s an insurance policy for Landlords that covers rent losses if tenants fall in arrears. If the tenant runs up any legal costs (e.g eviction costs), then the insurance company will cover costs.
Note: “Landlord Rent Guarantee Insurance” is different from “Landlord Building Insurance”.
If a tenant is in love with a particular property, and is willing to lick gum off the landlords shoe to secure the tenancy, then they could always combine the two methods; double the security deposit and pay for the insurance. While this particular method may significantly increase the initial costs of becoming a tenant, they should remember that they have the opportunity to regain the security deposit at the end of the tenancy (as long as they behave well), so the only real cost will be the insurance.
Why need a Rent guarantor?
A rental agreement is often made between the landlord and the tenant or tenants. But in some cases, a guarantor acts as third party to help provide security for the landlord in terms of the rental agreement.
A rental guarantor has entered into an agreement, this means that in the event of a tenant being unable to meet their obligations under the tenancy agreement, whether it is for overdue rent, damage to the property or something, the Guarantor is legally bound to accept the liabilities on behalf of the tenant.
What is guarantor agreement?
- If the tenant defaults in the payment of rent laid down as per the tenancy agreement, the guarantor will pay the landlord.
- If the tenant does not observe her/his obligations as set out in the agreement, the guarantor will pay all losses, damages, expenses and costs that are incurred as a result of the tenant’s default.
Duration of Obligation
A rent guarantor is obligated to fulfill your rent requirements if you default through the duration of your lease.
Risks of Guarantors
There are some risks to being a rent guarantor. If you miss payments on rent, the late payments can show up on the guarantor’s credit report, as they are legally connected to your rent agreement. If you don’t pay and the guarantor also cannot pay, the landlord or property manager has a right to file a lawsuit against both you and the landlord to collect rent and associated fees. Any judgments issued by the court also may show up on the guarantor’s credit.