Guarantor Issues

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    Guarantor Issues

    We have just said goodbye to another troublesome tenant and would appreciate a view please in connection with the Guarantor Agreement associated with this tenancy - the first time we have used a guarantor. The tenant has left owing about £2k in unpaid rent, cleaning etc although we have a £1k deposit that hopefully will come our way! The Guarantor however is now refusing to pay the balance on the grounds that our agreement is not lawful. When the lady in question expressed an interest in a tenancy we gave her a sample tenancy agreement and tenant application form. When she came back with a completed application form except for referees she told us her employer was willing to act as guarantor. As he is a well known and respected local businessman we went to see him and he cheerfully agreed to sign our form in front of the witness we had taken along, verbally stating he knew what the responsibilities were. His decision to act had been taken in consultation with the prospective tenant and without our prior knowledge and I suppose our assumption was that he would have seen her copy of the sample TA. The TA was subsequently signed by the tenant but we overlooked supplying a copy of this to him and it this point he is using to justify not paying the shortfall. Does he have legal justification for withholding payment? Thanks in advance.

    #2
    As far as I can see if he signed as Guarantor he takes that responsibility on. Whether he saw / requested to see the TA should make no difference at all.

    Send him a LBA and don't take any bull off him.
    Ambition is Critical

    I don't profess to be a knowledge in all areas, my advice is based on life experience.

    Comment


      #3
      I do not think that is the case. I have been led to believe from what the legal experts on the forum have said, that because of the lack of consideration involved, a guarantor agreement must (to be enforceable in court) be executed as a Deed and that the G must have had the chance to read the TA and to seek independent legal advice before committing himself to being a G.

      If this was not the case, I think you may struggle to recover the debt from the G.
      'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

      Comment


        #4
        I'm almost sure this is incorrect, mindthegap but will stand corrected if one of the legal experts says otherwise but as long as the guarantor is acquainted with their responsibilities and THEN signs an agreement that advises they should consult a solicitor if they are in any doubt then it should not be required that this agreement is executed as a deed, surely this is just a standard contract??
        Ambition is Critical

        I don't profess to be a knowledge in all areas, my advice is based on life experience.

        Comment


          #5
          I was under the impression that the guarantor must see the tenancy agreement unless the guarantor is being executed as a deed as a deed requires no consideration.

          Comment


            #6
            I am not a legal expert but I have been advised by one that with guarantor agreements it is best to leave no stone unturned, otherwise it is possible for the guarantor to wriggle out of his commitment.

            Whether he is able to do so in OP's case or not would ultimately be up to a judge, but I would not be booking that holiday in the Seychelles on the strength of it.
            'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

            Comment


              #7
              Whatever the position may be generally regarding the enforcement of a person's obligations under a document, whether a deed or not, guarantees are a bit of a special case. In particular, where a guarantor obtains no benefit from the arrangement he is guaranteeing the court will consider the matter carefully. There are no hard and fast rules. Whilst the court will not go so far as to say that no sane person would guarantee an arrangement under which he derives no benefit, it adopts a position that goes some way towards that idea.

              First the court will look at the guarantee. Is it clear what is being guaranteed and precisely what the guarantor's obligations are? Any ambiguities will be construed against the landlord. The more onerous the terms of the guarantee the more suspicious the court will be that, in the absence of legal advice, the guarantor failed to understand the obligations imposed.

              Next, the court will look at the circumstances surrounding the signing of the guarantee. Did the guarantor understand the full effect of the guarantee? Was the guarantor was misled as to its effect? Was he advised or given the opportunity to take independent legal advice?

              Finally, the court will look at the guarantor. They are likely to have more sympathy with an elderly maiden aunt than a professional gentleman.

              It will be seen that all this leaves a number of possible permutations. The court will weigh everything up and what weight it gives to any aspect will depend on the circumstances. I think we can say that where the guarantee is onerous and/or badly drafted; the guarantor a person who cannot reasonably be expected to understand exactly what a guarantee is; the agent has said: "Don't worry dear. It's just a standard document"; and no legal advice was recommended or taken; then the guarantor is going to be let off the hook. On the other hand, where the guarantee is clear and limited as to time and amount; the guarantor is someone who can reasonably be expected to understand the basic nature of a guarantee; the guarantor was not misled in any way; and the guarantee is witnessed by a solicitor who has confirmed that he has explained the guarantee to the guarantor; then the guarantor is going to be hard put to wriggle out of his obligations.

              In summary, the terms of the guarantee need to be clear and preferably not too onerous, and there needs to be probity on the part of the person procuring the guarantee and full understanding on the part of the guarantor.

              Does the guarantor need to see a copy of the tenancy agreement? Strictly, I do not think so and especially if the guarantee is a deed. That is because signing a deed is considered to be a solemn act where the person making the deed has considered the matter properly. Against that, we need to take into account the observations above; if the guarantor has not seen a copy of the tenancy agreement that is matter which the court may take into account. Certainly actually denying the guarantor an opportunity to see the tenancy agreement (and it would not surprise me if that happens since some agents deny even the tenant a copy of the tenancy agreement) is unwise. Good practice is to attach a copy of the tenancy agreement to the guarantee. Here it needs to be borne in mind that the guarantee should be completed immediately after the tenancy agreement; that is not the same as saying the guarantee needs to be executed after the tenancy agreement - see this thread: http://www.landlordzone.co.uk/forums...ion#post182883

              Does the guarantee need to be by deed? This is, so far as I know, a question that remains to be answered by the courts. The best advice is that it should be executed as a deed as it removes any argument that there is a lack of consideration.

              Comment


                #8
                Whether or not a Deed is used, and I recommend that every guarantee should be by Deed, it must be in writing at least.
                An oral guarantee is invalid: Statute of Frauds 1677.
                JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                4. *- Contact info: click on my name (blue-highlight link).

                Comment


                  #9
                  Letting agents are reminded that it is a criminal offence for them to prepare any deed in the course of their business.

                  Comment


                    #10
                    Many thanks to you all for your prompt and thoroughly thought through comments - time for some reflection I think!

                    Comment


                      #11
                      LA this morning informed me that for someone to be a Guarantor on our property, its a simple form which they fill in.

                      I wonder how much weight this form would carry if i had to travel to the small claims court to recover costs.


                      In the event on non-payment of rent & eviction, who would you chase through the courts on this.?

                      Tenant or Guarantor.?

                      Chicco\

                      Comment


                        #12
                        Depends on what this form says.

                        Comment

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