Prospective T is bankrupt; and should L execute Guarantee?

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    Prospective T is bankrupt; and should L execute Guarantee?

    Hi All,

    A couple with a young child would like to rent my property. However, they've told me that they've recently been made bankrupt. Should I be worried about this? Here are a few bits of information:
    • The bankrupt business was a partnership between the husband and wife
    • The husband is still self-employed in the same profession
    • The wife is an employee in the same job she had before the bankruptcy
    • They are selling the house they used to live in, so I can't get previous-landlord references


    I've asked them to provide references for the wife's job, for the contractor the husband does most of his current work for and for their accountant. What should I be looking for when I follow these up? Is it worth doing a credit check for one or both of them? Is there anything else I ought to do or is it a mistake to even think about renting to them?

    Thanks a lot for any help/advice,
    Adam

    #2
    If they are already bankrupt they are debt free so probably better able to pay the rent than most

    I would ask to see bank statements to prove the earnings and payslips
    Mosty references are not worth the paper they are written on anyway

    Comment


      #3
      If you are concerned you could possibly see if they can get a grantor. At least these people sound like workers and not bleeding the state dry.
      Or ask for 3x month deposit. If you got tenants with good history there is nothing to say they would not get made redundant in a couple of months.

      Comment


        #4
        Originally posted by Blue View Post
        If you are concerned you could possibly see if they can get a grantor**. At least these people sound like workers and not bleeding the state dry.
        Or ask for 3x month deposit^^. If you got tenants with good history there is nothing to say they would not get made redundant in a couple of months.
        *- Read 'guarantor'.
        ^^- No. Stick at maximum of two months' deposit.
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        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


          #5
          Thanks all for the thoughts so far. house275 - I was planning on phoning up the referees given, rather than getting written references.

          Comment


            #6
            Originally posted by house275 View Post
            If they are already bankrupt they are debt free so probably better able to pay the rent than most
            Unlikely. As most people who have been made bankrupt have proven that they cannot manage their finances.

            In this case, if the business has been made bankrupt, ask to see Company accounts and what led to the bankruptcy; and if the husband is still employed within the same profession, ask to see his proof of income. Unless you're 101% certain of the tenancy application, after all checks (credit, ID, employment, history, etc.), decline.
            The information in my posts is provided 'as is'. This is not intended to be legal advice. Legal or other professional advice should be sought before acting or relying on this information or any part of it. I will not be held responsible for loss or damage arising from errors in the information or the way in which a person uses the information on this . For more information on your query use the '' link at the top of this page. Agreements, Forms & Notices can be found .

            Comment


              #7
              If you are concerned you could possibly see if they can get a grantor. At least these people sound like workers and not bleeding the state dry.
              probably not. Just bleeding dry the small businesses and individuals to whom they owed money...its an easy way out sometimes (though not always). I know someone who was worth a fortune, took all the money out of a business, "sold" assets and then went bankrupt. Still living in a (rented) very fancy house with kids at private school
              Unshackled by the chains of idle vanity, A modest manatee, that's me

              Comment


                #8
                I wouldn't take these tenants without a guarantor, and professional and very thorough reference/credit checks.

                Comment


                  #9
                  Surely you shouldn't even be considering these applicants unless they are able to either:
                  1. Meet the criteria to qualify for rent guarantee insurance OR
                  2. Can provide a home owning guarantor.

                  Comment


                    #10
                    We rent my husband got made redundant(last March) from a very well paid job I have been ill for 8 months awaiting an operation we have had to apply for HB and our LA knows nothing of this
                    We always pay on time keep our bills up to date & go without
                    Now we came as two employed professionals with excellent previous LA ref from previous place and employers ref from oh's company accountant

                    We have also been bankrupt in the past as a business partnership (which we have told all the LA's about) we were lucky I guess that the first LA we applied to did not treat us as a sub class with suspicion and contempt

                    Bankrupt is not a dirty word and LL's get used to it there are plenty of them out there and the number is growing every day, I personally know of 2 independant retailers who will be forced into bankruptcy in the following months as this snow has been the final straw for them,they usually have to hand over the family home to settle debts (unless there is no equity in it) and are grateful for a roof over there heads renting is all that is left for them

                    They have no lump sums to put down huge deposits or pay months of rent in advance if they did it would have been taken by the Official Receiver
                    As for why they went bankrupt it is none of your business you are LL's not judges
                    If they can provide proof of earnings and ref they are no more risk than anyone else

                    Comment


                      #11
                      Originally posted by westminster View Post
                      I wouldn't take these tenants without a guarantor, and professional and very thorough reference/credit checks.
                      What point is there in doing a credit check ?
                      They will fail it

                      Any debts showing as records are not up to date will fall in the bankruptcy

                      If they are undischarged bankrupts they are still reporting to the OR so any hanky panky & you could drop them right in it anyway ,as they are not allowed to run up any debt whilst bankrupt (usually 12 months can get early discharge if OR feels it suitable) if they have been discharged early this is an indication that there was no dubious goings on otherwise they would go the full term

                      Comment


                        #12
                        Originally posted by house275 View Post
                        Bankrupt is not a dirty word...
                        No one said it was.

                        Originally posted by house275 View Post
                        As for why they went bankrupt it is none of your business you are LL's not judges
                        It is however, 100% the LL's property letting's business that's involved; if the T does not want to reveal any relevant info. during the application process, then it's a straight decline. It may be the T's home for the duration of the tenancy, but it's also the LL's property, and all relevant checks need to be made on whoever is going to be occupying it.

                        Originally posted by house275 View Post
                        If they can provide proof of earnings and ref they are no more risk than anyone else
                        One could say that about any potential working tenant; this in itself would not be the only checks required, as all possible risks must be assessed for each individual tenancy.
                        The information in my posts is provided 'as is'. This is not intended to be legal advice. Legal or other professional advice should be sought before acting or relying on this information or any part of it. I will not be held responsible for loss or damage arising from errors in the information or the way in which a person uses the information on this . For more information on your query use the '' link at the top of this page. Agreements, Forms & Notices can be found .

                        Comment


                          #13
                          Thanks all & house275 for the interesting point about bankruptcy - my prospective tenants only went into bankruptcy a couple of weeks ago.

                          I will talk to them about providing a guarantor. However, it does seem to open a whole can of worms - not least finding a good Deed of Guarantee (as well as finding a witness, getting it signed etc). There's the old one from the RLA floating around but I've seen comments here saying it's too prescriptive and might be thrown out by a court...

                          Adam

                          Comment


                            #14
                            Should Landlord be present at signing of Guarantor form?

                            Hi All,

                            I have asked some prospective tenants to provide a guarantor (as per my previous thread - sorry I can't create a link to it). They've arranged to do this and suggested the guarantor's employer as a witness. Do I need to be present at the signing of the form? If not, how do I know that the witness is even a real person? For that matter, should I meet the guarantor? (I plan to talk to them on the phone and will be doing credit checks etc.)

                            Thanks a lot for any advice,
                            Adam

                            Comment


                              #15
                              Originally posted by adamr View Post
                              I have asked some prospective tenants to provide a guarantor (as per my previous thread - sorry I can't create a link to it).
                              Do you mean these prospective T's?
                              Bankrupt prospective tenants - should I worry?


                              Originally posted by adamr View Post
                              Do I need to be present at the signing of the form?
                              LL does not have to be present at signing of a Deed of Guarantee between Guarantor (G) and Witness (W).

                              Originally posted by adamr View Post
                              If not, how do I know that the witness is even a real person?
                              You could do checks on W. Or, ask W for copies of proof of ID, e.g. passport, driving licence, etc.

                              Originally posted by adamr View Post
                              For that matter, should I meet the guarantor? (I plan to talk to them on the phone and will be doing credit checks etc.)
                              Not necessarily. But, you will need to do the same thorough checks on G as you would do on T.
                              The information in my posts is provided 'as is'. This is not intended to be legal advice. Legal or other professional advice should be sought before acting or relying on this information or any part of it. I will not be held responsible for loss or damage arising from errors in the information or the way in which a person uses the information on this . For more information on your query use the '' link at the top of this page. Agreements, Forms & Notices can be found .

                              Comment

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