Deed of Guarantee

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  • Deed of Guarantee

    After reading a couple of posts here, (I'm just reading everything here so please bear with me asking all of these random questions.)
    What makes it illegal for a letting agent to prepare a deed of guarantee?
    Can a Landlord prepare one without a problem?
    Lastly, wouldn't it be better to have the guarantors name on the AST and then a guarantor clause that tells them of their responsibilities if tenants stop paying rent etc. and then have them sign it as well. Has this way ever been tested?

  • #2
    Originally posted by spare View Post
    After reading a couple of posts here, (I'm just reading everything here so please bear with me asking all of these random questions.)
    What makes it illegal for a letting agent to prepare a deed of guarantee?
    Can a Landlord prepare one without a problem?
    Lastly, wouldn't it be better to have the guarantors name on the AST and then a guarantor clause that tells them of their responsibilities if tenants stop paying rent etc. and then have them sign it as well. Has this way ever been tested?
    A letting agent CAN write a deed of guarantee, he just can't charge for it. Without checking the caselaw it is deemed that he charges you for everything he does in his fee - so he charges for the deed, which is illegal.

    Landlord can write such a deed legally - it's jus doubtful that without the relevant legal training it would be watertight.

    Technically, the guarantor could be named as a joint tenant (joint and serveral liability) with no mention of guarantee anywhere, only one of the tenants has to live in the property. On paper this would give you the same protection. However, real tenant may not want this option as the (guarantor) tenant wold then have the power to give notice on the tenancy once it becomes a periodic tenancy.

    For this same reason you may want to avoid this - if GT gives notice but RT does not leave you have no recourse for further debt/damage from GT.

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    • #3
      Originally posted by Snorkerz View Post
      Technically, the guarantor could be named as a joint tenant (joint and several liability) with no mention of guarantee anywhere, only one of the tenants has to live in the property.
      You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence. This seems a very strange suggestion!
      The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

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      • #4
        Originally posted by Paul_f View Post
        You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence. This seems a very strange suggestion!
        I think that what Snorkerz is saying is that as long as at least one of the joint-tenants lives at the property the assured shorthold status of the tenancy is not affected, so that an extra joint-tenant not living there could be added just to make him liable for the rent, etc.

        HA 1988 s.1 indeed says that only one of the joint-tenants must occupy the property as his only or principal residence for the tenancy to be an assured tenancy.

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        • #5
          On the AST it would have the tenants names and then underneath it would have the title "Guarantor" and then the guarantors name and address, they would then sign it at the back with the tenants under the title also of "guarantor". Would this then give them the ability to end the contract as they are not named as tenants, but as guarantor!!!

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          • #6
            spare, you are asking questions that are really heading into the legal realm. Guarantees are notoriously difficult to make watertight and whilst we do have some legally qualifed membes on here, you might be better asking the question of a solicitor who specialises in L&T law. Sure, it will cost a few bucks, but nothing compared to the potential loses if you have a worthless guarantee.

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            • #7
              Originally posted by Paul_f View Post
              You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence.
              And why would this be a problem?

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              • #8
                Because a guarantor by definition is somebody who provides a separate security in the event of a tenant who is in breach. By your argument you might as well make all tenants their own guarantors which defeats the object of a guarantor altogether. A guarantor by definition is a third party who only comes into play if the original party is in breach and fails to honour the contract.
                The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

                Comment


                • #9
                  I dont know who is correct Paul F or Snorkerz but I have thought about putting a guarantor down as a joint tenant. Not only get the same security as being a guarantor but if you evicted via section 8 it would save doing a separate court action against the guarantor for any liabilty as they would both be named on any s8 eviction and ccj given.

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                  • #10
                    Originally posted by Paul_f View Post
                    Because a guarantor by definition is somebody who provides a separate security in the event of a tenant who is in breach. By your argument you might as well make all tenants their own guarantors which defeats the object of a guarantor altogether. A guarantor by definition is a third party who only comes into play if the original party is in breach and fails to honour the contract.
                    I think you are being pedantic. I accept that my suggstion (which has it's negatives) does not give the landlord a guarantor - in deed I specifically stated that there should be no reference on the agreement regarding a guarantee - just joint and several liability.

                    Do you agree that even though the landlord would not have a guarantor per-se, he would have virtually the same protection from this non-resident tenant?

                    Comment


                    • #11
                      Originally posted by spare View Post
                      What makes it illegal for a letting agent to prepare a deed of guarantee?
                      I think it's Part 3 of the Legal Services Act 2007 http://www.legislation.gov.uk/ukpga/2007/29/part/3
                      Can a Landlord prepare one without a problem?
                      Yes, anyone can DIY their own deed - it's providing/charging for such a service that's illegal if the provider doesn't have the necessary qualifications entitling him to provide the legal services (such as deed drafting).

                      Lastly, wouldn't it be better to have the guarantors name on the AST and then a guarantor clause that tells them of their responsibilities if tenants stop paying rent etc. and then have them sign it as well.
                      No, it wouldn't be better. There's a big different between the nature of contracts and deeds, and between the position of a tenant (who gains a benefit from the agreement to be liable for rent) and the position of a guarantor (who gains no benefit from such an agreement). The legally qualified members of the forum have repeatedly advised that a guarantee executed as a contract may be unenforceable, so it is highly advisable to execute it as a deed (and really not that difficult). Google deed/contract for more info on the difference between the two.

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                      • #12
                        Having the guarantor named on the tenancy agreement, but not as a tenant would be the best alternative I would think, but the AST my friend has does it this way but the guarantee clause is short and doesn't list their liabilities etc the solicitors haven't really responded to him regarding this issue. If he added the full details under the guarantor heading of the same info that would normally be in a deed of guarantee and they also sign it, wouldn't that be the best of both worlds possibly.

                        Comment


                        • #13
                          Originally posted by Paul_f View Post
                          You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence. This seems a very strange suggestion!
                          You can have a guarantor named as [joint] tenant, and he would be a legal tenant. As jjlandlord says, HA1988 only requires one of any number of joint tenants to be resident for it to be an assured tenancy. And if none were resident, it would be a common law tenancy.

                          Adding a G as a JT is how, I believe, some agents think that they can make a non-occupying party liable for the rent in the event of default. I believe, too, that it may often succeed; but it's also possible that the court would not accept it, if the nature of the arrangement became apparent to the court - i.e. if it became clear that the essential components of a contract were not present (which could easily happen if the G defended a claim).

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                          • #14
                            Originally posted by spare View Post
                            If he added the full details under the guarantor heading of the same info that would normally be in a deed of guarantee and they also sign it, wouldn't that be the best of both worlds possibly.
                            Again, no.

                            Executing the guarantee as a deed is the surest way to ensure it is enforceable.

                            Comment


                            • #15
                              Sorry our posts have crossed.

                              Of the three solicitors that I have spoken to, they have a guarantor clause in their ast agreements that is very brief and the guarantor also signs under the title guarantor. This "they" say is fine, but it does not list their liabilities so I just can't see it being ok or standing up to scrutiny.

                              Comment

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