Rent guarantee agreement
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About this rent guarantee agreement
This is a short agreement to bring in a guarantor to a residential lease agreement. The guarantor provides a promise to pay rent unpaid by one or more of the tenants and also for any loss or damage caused by the tenant.
To use this template, simply download for free, edit lightly (most edits required are for names and addresses) and ask the guarantor to sign. Once you have also signed, the agreement is legally binding. Having witnesses sign isn't necessary for the legality of the document, but we provide for it to reduce the probability that someone other than the guarantor signs.
Practical points about asking someone else to guarantee rent
The guarantor has the same liability as the tenants
If you let your property to more than one tenant, you will probably use a tenancy agreement that gives your tenants joint and several liability to pay the rent. This means your tenants are jointly responsible for the total rent, even if they decide between themselves how to split payment of it.
The advantage to the landlord of renting on a joint and several liability basis is that he or she can pursue any of the tenants for any unpaid rent. Effectively, the risk that one of the tenants might not pay the rent is transferred to the other tenants, not the landlord.
A rent guarantee agreement brings in a guarantor on the same basis as the tenancy agreement. So if the tenants are jointly and severally liable, the guarantor will be as well. A guarantor is unlikely to be happy to guarantee the rent of tenants he or she does not know (such as in the case of parents guaranteeing the rent for a property in which a child lives with other friends). While capping the amount guaranteed is one way to make the guarantor happier, it does transfer risk back to the landlord. The landlord might prefer not to bring in the guarantor, but instead ask for more rent in advance, or a larger deposit.
Make sure you check tenant references thoroughly as well
Enforcing a guarantee is time consuming and costly. Landlords are better to treat them as a tool to remind tenants to pay than as full security. Including one doesn't reduce the need to vet tenants well before they sign the tenancy agreement.
Put the guarantee in the tenancy agreement
Rent guarantees are best included in the tenancy agreement, rather than in a separate document. The reason is that tenants gain rights when the tenancy agreement comes into effect (usually when signed). Unless you time it right, you might find you have tenants in your property before a guarantee is in place. We include rent guarantee terms in residential tenancy agreement, and highly recommend that if possible, you use one of them rather than this template.
The contents of the template include:
- Other legal provisions
This document was written by a solicitor for Net Lawman. It complies with current Indian law.
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