Paying consideration to a guarantor.

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    Paying consideration to a guarantor.

    Having guarantees signed and witnessed as a deed at a distance can be somewhat time consuming, and I've not found a suitable online document signing service which supports deeds (well, not a free one, and the number of contracts I do does not justify a subscription).

    Am I correct that if consideration of £1 is paid then a guarantee by the Landlord to the Guarantor then it does not need to be witnessed as a deed? I presume that is better than "in consideration for agreeing to let to the tenant"?

    I would normally issue the tenancy to both the tenants and the guarantor for signature, at the same time as sending the guarantee to the guarantor and then sign the tenancy myself once all satisfactorily completed. Would it be important when payment is made, e.g. before or after I sign?

    (I understand that guarantees are not rock solid but I find them useful with young professional tenants as they usually appreciate there is a risk of making a relative (usually) liable).
    Assume I know nothing.

    #2
    Originally posted by Hooper View Post
    Having guarantees signed and witnessed as a deed at a distance can be somewhat time consuming, and I've not found a suitable online document signing service which supports deeds (well, not a free one, and the number of contracts I do does not justify a subscription).
    Witnessing a deed remotely isn't really possible (I just don't think the law has caught up with the technology in that particular area).
    Unless someone knows about some recent development that I don't.
    So you're always moving paper around (and that's unsatisfactory absent some kind of protocol like conveyancers use when selling properties).

    Am I correct that if consideration of £1 is paid then a guarantee by the Landlord to the Guarantor then it does not need to be witnessed as a deed? I presume that is better than "in consideration for agreeing to let to the tenant"?
    The consideration satisfies one element of the creation of a contract, which is usually absent, hence the requirement to use a deed.
    "in consideration for agreeing to let to the tenant" isn't really consideration in contract terms, it's just crowbarring in a word.

    I would normally issue the tenancy to both the tenants and the guarantor for signature, at the same time as sending the guarantee to the guarantor and then sign the tenancy myself once all satisfactorily completed. Would it be important when payment is made, e.g. before or after I sign?
    There's a general expectation that legal documents are signed in the order that they need to be to be valid, but your process has a weakness, in that normally a tenancy agreement becomes a contract when the tenant signs it (because it's met all of the criteria of a contract by then).
    You'd either have to make it clear as a contract term that it's not valid until countersigned by you (and hope that that holds up if there's a query, so a big red warning on the front page would be helpful).
    Or something that says that the agreement is only valid when the guarantor agreement is signed and returned.
    Or don't send the contract out to the tenant with all the details to sign until you've received the guarantor agreement (which you'd send with a copy of the contract template so the guarantor could see what they're committing to.

    (I understand that guarantees are not rock solid but I find them useful with young professional tenants as they usually appreciate there is a risk of making a relative (usually) liable).
    Fair enough.

    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      I think Keates is right, as far as I know, there is no method of remotely executing a deed. Practice Direction 8 covers this, and the most I have experience with is getting an Order for Execution under s39 Senior Courts Act as applied by s38 County Courts Act to have a third party execute a deed on the behalf of someone. Even then it had to be the nominated party physically signing it and being witnessed, and you know, getting a Court Order so not exactly "fast" lol.

      Comment


        #4
        There is no statute which says a guarantee has to be a deed, only that it has to be in writing. If a guarantee is executed as a deed it removes any doubt as to to the sufficiency of any expressed consideration. As jpk says, saying the guarantee is in consideration of the grant of the tenancy is probably insufficient as, apart from anything else, there is nothing moving from the landlord to the guarantor; each party to a contract must receive something of value even if it is only nominal. If a guarantee is not a deed it should be expressed to be made in consideration of the sum of one pound paid by the landlord to the guarantor and receipt acknowledged. There is no need for the sum to be actually paid.

        I do not see how getting a guarantee signed and witnessed is especially time consuming. It is not to difficult surely for anyone to find a witness. A deed is marginally preferable as the limitation period is extended to 12 years and a deed is a solemn act. As for a precedent see below. I did post the precedent somewhere in the forum but cannot seem to find it. it is subject to te observations and warnings I made in the thread I posted it in and in this thread: Tenancy Guarantees - LandlordZONE Forums which contains other information.

        *

        THIS DOCUMENT IMPOSES POTENTIALLY ONEROUS OBLIGATIONS. YOU ARE ADVISED TO TAKE LEGAL ADVICE BEFORE SIGNING IT.



        A Deed of Guarantee dated [leave space to insert day and month] 2021

        1. Parties

        1.1 The Guarantor: [insert name(s) and address(es) of guarantor(s)]

        1.2 The Landlord: [insert name(s) and address(es) of landlord(s)]

        2. Definitions and Interpretation

        In this deed:

        2.1 “the Tenant” means [insert name(s) of the tenant(s)]

        2.2 “the Tenancy Agreement” means an agreement dated the same day as this deed and completed immediately before it made between the Landlord (1) and the Tenant (2) relating to [insert address of property]

        2.3 “the Rent” means the rent reserved by the Tenancy Agreement

        2.4 “the Tenant's Obligations” means the obligations imposed on the Tenant by the Tenancy Agreement

        2.5 “damages” includes any liabilities, awards of damages, losses, compensation, penalties, costs, disbursements and expenses resulting from any claim, demand, actions or proceedings

        2.6 “the Guarantee” means the guarantee given by clause 4

        2.7 Where a party consists of more than one person any covenant given is given jointly and severally

        3. Background

        The Tenancy Agreement was entered into on the basis that the Guarantor would guarantee the payment of the Rent and the performance of the Tenant's Obligations

        4. Guarantee

        The Guarantor covenants with the Landlord that the Tenant will pay the Rent and observe and perform the Tenant's Obligations and if the Tenant fails to do so the Guarantor will pay the Rent and observe the Tenant's Obligations in respect of which the Tenant is in default and make good to the landlord on demand and indemnify the Landlord against all damages arising from such non-payment non-observance or non-performance

        5. Extent of Guarantee

        The Guarantor and the Landlord agree that the Guarantee continues even if

        5.1.1 the terms of the Tenancy Agreement are varied so long as they are not varied in any way which materially prejudices the Guarantor

        5.1.2 the Landlord grants any time or indulgence to the Tenant by neglecting or forbearing to enforce payment of the Rent or the observance and performance of the Tenant's Obligations

        6. Acknowledgement

        6.1 The Guarantor acknowledges that he has been afforded sufficient opportunity to read the Tenancy Agreement or a draft of it before executing this deed.

        6.2 The Landlord warrants that the Tenancy Agreement is in substantially the same form as any draft of it supplied to the Guarantor and to the extent that it is not the changes were drawn to the Guarantor's attention in writing before the Guarantor executed this deed.

        7. Deed

        This instrument is executed by the parties as a deed.

        Signed as a deed by

        [insert name of guarantor]

        in the presence of:

        Witness signature

        Witness name

        Witness address







        Signed as a deed by

        [insert name of landlord]

        in the presence of:

        Witness signature

        Witness name

        Witness address


        Comment


          #5
          Originally posted by Lawcruncher View Post
          I do not see how getting a guarantee signed and witnessed is especially time consuming. It is not to difficult surely for anyone to find a witness.
          I live somewhere quite remote and am not very social.
          Finding someone who knows me well enough to be prepared to be a witness who isn't connected to me is often a real pain.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            Originally posted by jpkeates View Post
            There's a general expectation that legal documents are signed in the order that they need to be to be valid, but your process has a weakness, in that normally a tenancy agreement becomes a contract when the tenant signs it (because it's met all of the criteria of a contract by then).
            You'd either have to make it clear as a contract term that it's not valid until countersigned by you (and hope that that holds up if there's a query, so a big red warning on the front page would be helpful).
            Or something that says that the agreement is only valid when the guarantor agreement is signed and returned.
            Yikes. I had no idea. I assumed that the contract was not complete without my signature (unless of course I had allowed them to move in).

            Thanks. Very helpful reply.
            Assume I know nothing.

            Comment


              #7
              Originally posted by Lawcruncher View Post
              There is no statute which says a guarantee has to be a deed, only that it has to be in writing. If a guarantee is executed as a deed it removes any doubt as to to the sufficiency of any expressed consideration. As jpk says, saying the guarantee is in consideration of the grant of the tenancy is probably insufficient as, apart from anything else, there is nothing moving from the landlord to the guarantor; each party to a contract must receive something of value even if it is only nominal. If a guarantee is not a deed it should be expressed to be made in consideration of the sum of one pound paid by the landlord to the guarantor and receipt acknowledged. There is no need for the sum to be actually paid.

              I do not see how getting a guarantee signed and witnessed is especially time consuming. It is not to difficult surely for anyone to find a witness. A deed is marginally preferable as the limitation period is extended to 12 years and a deed is a solemn act. As for a precedent see below. I did post the precedent somewhere in the forum but cannot seem to find it. it is subject to te observations and warnings I made in the thread I posted it in and in this thread: Tenancy Guarantees - LandlordZONE Forums which contains other information.
              Also really helpful, thank you. Surprised that it does not actually need to have been paid. Would you replace paragraph 7 with a clause stating something along the lines of "In consideration of the Guarantor agreeing to make the Guarantee the Landlord agrees to pay the Guarantor £1 of which the Guarantor hereby confirms receipt.?"
              Assume I know nothing.

              Comment


                #8
                Originally posted by Hooper View Post

                Also really helpful, thank you. Surprised that it does not actually need to have been paid. Would you replace paragraph 7 with a clause stating something along the lines of "In consideration of the Guarantor agreeing to make the Guarantee the Landlord agrees to pay the Guarantor £1 of which the Guarantor hereby confirms receipt.?"
                No.

                I started to alter the document to make it a non-deed, but it was not really working. Better to keep it as a deed. If you do, no consideration is needed.

                Comment


                  #9
                  Originally posted by Hooper View Post
                  I assumed that the contract was not complete without my signature (unless of course I had allowed them to move in).
                  It all depends on how you go about things. It is even possible to form a contract without anyone signing anything.

                  The best way is at the very start to give the proposed tenant written notice (in duplicate - one copy to be signed and returned by the tenant) to the effect that all discussions and negotiations are subject to contract and that there will be no contract until formal written agreements signed by the parties have been exchanged.

                  As to the guarantee, you should have this executed but undated by the guarantor and date it the same day as the tenancy agreement when it is completed.

                  Comment


                    #10
                    Trying to move a couple in for the weekend. All the referencing is complete bar the Deed of guarantee. It is possible that timing may slip into next week.

                    In getting the deed signed, how important is the commencement date of the tenancy. Can I refer to a tenancy agreement beginning July 2021, rather than referring to a specific date? or is it even simpler than that?

                    Assume I know nothing.

                    Comment


                      #11
                      In fact, do I need any date at all?
                      Assume I know nothing.

                      Comment


                        #12
                        You need to be sufficiently clear about what agreement the guarantee agreement relates to that it couldn't be challenged on the basis that it was actually a different agreement.
                        Imagine that the person who signed the guarantee was determined to lie about everything, what would it take to persuade a judge that it was more likely than not that the two agreements were related and that the guarantor knew what they were guaranteeing?

                        You also should encourage the guarantor to take legal advice before signing (they probably won't and, if they do, the advice would probably be not to sign).
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment


                          #13
                          Cheers. I always provide a scary worst case scenario covering letter. The guarantor in this case is a JP. I have a signature box for the guarantor on the tenancy agreement. I might just add a statement that the guarantor confirms that this is the lease which they agree to guarantor.
                          Assume I know nothing.

                          Comment


                            #14
                            One more question - how important is it that the deed of guarantee document is signed by the landlord (and witnessed)
                            Assume I know nothing.

                            Comment


                              #15
                              Originally posted by Hooper View Post
                              One more question - how important is it that the deed of guarantee document is signed by the landlord (and witnessed)
                              If the deed is between the guarantor and the landlord it's essential for it to be a deed.
                              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                              Comment

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