Pursuing a guarantor for rent owed

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    Pursuing a guarantor for rent owed

    Hello,

    I'm looking for some advice on what to do about getting the money I'm owed by a T. She was evicted recently and is in 3 months arrears which she says she cannot pay. Her parents are her guarantors but they have told me to pursue the T for the money and seem to be trying to avoid their obligations.

    My question is, to what extent/for how long can/should I ask the T for the money before getting it from the guarantor, and once I've asked the guarantor for the money, how long do they have legally to pay up? Do I have to exhaust other avenues like getting bailiffs involved etc before the guarantors have to cough up?

    Thanks in advance.

    #2
    Did the guarantors enter into their obligations:
    a. in the same document as the one in which you granted the letting to T; or
    b. in a separate document labelled clearly as a Deed?
    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


      #3
      Quite simply, it depends how the guarantee is worded.

      Comment


        #4
        Originally posted by jeffrey View Post
        Did the guarantors enter into their obligations:
        a. in the same document as the one in which you granted the letting to T; or
        b. in a separate document labelled clearly as a Deed?
        It's in the same document.

        Comment


          #5
          I understand you can go after the guarantor immediately (copy in the demand to the tenant as well), BUT, as already highlighted, if the guarantee wasn't made as a Deed, you will have trouble enforcing.

          If it is a deed, go for the guarantor immediately. Letter before action.

          If it's not..... then you will struggle I'm afraid.

          Comment


            #6
            Originally posted by thevaliant View Post
            I understand you can go after the guarantor immediately (copy in the demand to the tenant as well), BUT, as already highlighted, if the guarantee wasn't made as a Deed, you will have trouble enforcing.

            If it is a deed, go for the guarantor immediately. Letter before action.

            If it's not..... then you will struggle I'm afraid.
            Yes. Terry1969: the problem turns on whether G is bound at all. G gave no contractual consideration (i.e. G received no benefit from L in exchange for guaranteeing T's obligations). Only by embodying the deal in a Deed can the problem definitely be avoided.
            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


              #7
              Has the deed argument ever been tested in court?

              I've seen several people say that although its best / safer to have a guarantee executed as a deed a contract might be acceptable.

              Arguments in favour of consideration - LL has given G's daughter a place to live, some might say this is of great value to G.

              Also does G know that guarantee might be un-enforceable. If not a letter before action to G might do the trick, especially if it includes filled in court documents.

              Comment


                #8
                Well also, whether it's enforceable depends on the wording of the guarantee.

                For example, is it contingent on the primary obligor's (i.e. T's) breach? If so, you would need to show T was in breach.

                Is there any grace period before you can go after G?

                Has the underlying tenancy agreement been amended (or renewed, or rolled over) since the guarantee was executed? If so, the guarantee may have been discharged by operation of law.

                Does it include an indemnity (i.e. a primary obligation on the part of G)?

                And lastly, as has been mentioned above, was it made by way of deed?

                Comment


                  #9
                  Originally posted by jeffrey View Post
                  Did the guarantors enter into their obligations:
                  a. in the same document as the one in which you granted the letting to T; or
                  b. in a separate document labelled clearly as a Deed?
                  I posted a related thread a while back, where my agent was proposing to incorporate the guarantor in the contract as a joint tenant (it never happened so I never saw the wording of the contract).

                  Anyway, lawcruncher said it could work...

                  See posts #26/27
                  http://www.landlordzone.co.uk/forums...t=26647&page=3

                  Comment


                    #10
                    Originally posted by worzelgummage View Post
                    Has the deed argument ever been tested in court?

                    I've seen several people say that although its best / safer to have a guarantee executed as a deed a contract might be acceptable.

                    Arguments in favour of consideration - LL has given G's daughter a place to live, some might say this is of great value to G.

                    Also does G know that guarantee might be un-enforceable. If not a letter before action to G might do the trick, especially if it includes filled in court documents.
                    So far as I am aware the deed argument has not been tested at a level where it would be a binding precedent.

                    The trouble with the consideration argument is that there is nothing that the law considers to be consideration moving between the landlord and the guarantor, though I suppose the landlord could pay the guarantor a nominal sum. The point is though that it really is not a problem drawing up a guarantee as a deed except - see the thread alluded to by Westminster - agents cannot do it without committing a criminal offence.

                    Comment


                      #11
                      Originally posted by Lawcruncher View Post
                      So far as I am aware the deed argument has not been tested at a level where it would be a binding precedent.

                      The trouble with the consideration argument is that there is nothing that the law considers to be consideration moving between the landlord and the guarantor, though I suppose the landlord could pay the guarantor a nominal sum. The point is though that it really is not a problem drawing up a guarantee as a deed except - see the thread alluded to by Westminster - agents cannot do it without committing a criminal offence.
                      Interesting thread. If paying a nominal sum as consideration to the guarantor can override the need for a deed is it not significantly simpler and cheaper than having a deed drafted? I am assuming the nominal consideration of, say, £1 would be sufficient.
                      Assume I know nothing.

                      Comment


                        #12
                        If the payment of a sum by the landlord to the guarantor "does it" then a nominal consideration will suffice as consideration does not have to be adequate: http://en.wikipedia.org/wiki/Conside...ot_be_adequate

                        The point is though that, deed or not, the terms of the guarantee need to be properly drawn up. The way to ensure that is to get it drawn up by a lawyer and not to rely on one the provenance of which is uncertain. If you are paying for it it may as well be drawn up as a deed so that any doubts about lack of consideration or whether the consideration is sufficient (as opposed to adequate) are removed.

                        Repeating what I said in the other thread, it is important to realise that having a guarantee in due form is not a magic formula that ensures it can be enforced. A guarantor needs to be chosen carefully and know what he is letting himself in for.

                        Comment


                          #13
                          Originally posted by Lawcruncher View Post
                          If the payment of a sum by the landlord to the guarantor "does it" then a nominal consideration will suffice as consideration does not have to be adequate: http://en.wikipedia.org/wiki/Conside...ot_be_adequate

                          The point is though that, deed or not, the terms of the guarantee need to be properly drawn up. The way to ensure that is to get it drawn up by a lawyer and not to rely on one the provenance of which is uncertain. If you are paying for it it may as well be drawn up as a deed so that any doubts about lack of consideration or whether the consideration is sufficient (as opposed to adequate) are removed.

                          Repeating what I said in the other thread, it is important to realise that having a guarantee in due form is not a magic formula that ensures it can be enforced. A guarantor needs to be chosen carefully and know what he is letting himself in for.
                          Thanks.

                          Mine has always followed at the end of the contract and says this (never had to test it):

                          "In consideration of the Landlord [] agreeing to let the Property [] to the Tenants [] on the terms of this Agreement, the undersigned [] agrees to act as guarantor for the Tenants and in doing so irrevocably and unconditionally, guarantees the obligations of the Tenants under this Agreement and undertakes jointly and severally to indemnify the Landlord, and keep the Landlord indemnified, against all losses, claims, damages, costs and expenses arising from or in connection with the failure of the Tenants to perform their obligations under this Agreement."

                          I also send the contracts to the guarantor with a cover letter explaining:
                          "Where a 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 any other reason, the Guarantor is legally bound to accept the liabilities on behalf of the tenant. It is also important to bear in mind that the tenants are entering into a joint tenancy where they are individually and severally responsible. Each guarantor is therefore guaranteeing not just the tenant they specifically have association with but any of the other named tenants as well."

                          Apart from the consideration element I have always assumed that this is fairly tight. Any thoughts?
                          Assume I know nothing.

                          Comment


                            #14
                            That consideration is shown as L granting a letting to T.
                            That is probably insufficient, as L grants nothing to G in exchange for G's guarantee to L.
                            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


                              #15
                              Originally posted by Brixtonia View Post
                              Thanks.

                              Apart from the consideration element I have always assumed that this is fairly tight. Any thoughts?
                              Originally posted by jeffrey View Post
                              That consideration is shown as L granting a letting to T.
                              That is probably insufficient, as L grants nothing to G in exchange for G's guarantee to L.
                              I accept that the consideration is probably insufficient - just wondering about the rest of it.
                              Assume I know nothing.

                              Comment

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