Tenants required to find guarantor instead of deposit

(45 Posts)
familygermsareok Fri 07-Mar-14 20:04:08

I'm a landlord of one property (inherited), not much experience and live geographically distant so leave most things up to letting agency. Tenants contacted me concerned as LA have told them they will have their deposit returned but must find a guarantor instead.
Guarantor must be solvent, a home owner themselves and happy to underwrite any expenses for repairs/cleaning/unpaid rent that the tenants do not cover.
I phoned the LA who confirmed they are now insisting on this for all tenants.

I am a bit shocked - I can foresee several potential problems on both tenants and landlord sides.
I cannot think of anyone I could personally ask to act as a guarantor if I was in tenants position and even if a guarantor was found who is to guarantee that they would pay up if needed. And I bet it wouldn't be the LA that paid any court expenses!

So is this common practice? Am I just being naive?

I have informed our tenants and LA that I will continue with current deposit system for them, but if new tenants are required would the guarantor system be reasonable?

It sounds ridiculous. There was a thread on here just last week about how dangerous it is to be a guarantor for anyone. I can't imagine many people being in a position to find one.

I'm a LL too, but entirely in the private sector so have no experience of LAs. Is there no chance to just rent your property to private tenants?

Use a different letting agent. That is a stupid notion and will result in more problems for LLs if there is damage. With a deposit you can just deduct costs but you would have to go to court to chase funds from a guarantor which would cost money and time.
Letting agents vary wildly in scumminess and some are floating down at the bottom of the pond.

CocktailQueen Fri 07-Mar-14 20:13:47

I'd stick with keeping the deposit. Years ago I owned a flat and let it out when we moved out. The tenant had her father as guarantor. She skipped out leaving the flat in a disgusting mess and using the deposit as her last month of rent sad and her father refused to pay up.

Couldn't face taking him to court. Wrote it up to experience. So a guarantor isn't necessarily a guarantee of anything.

gamerchick Fri 07-Mar-14 20:14:07

I have a friend who had to chase a guarantor.. apparently the guarantor didn't realise what she was liable for. when the tenant turned into a dickhead.

but it took courts and my friend had to shell out to get anywhere.

I don't know the ins and outs but surely if the current arrangement suits then you can insist on your own terms?

EBearhug Fri 07-Mar-14 20:18:20

Yes, it's a problem - I rent. I'm in FT work on a fairly good salary (though not quite enough to get a deposit together to buy), my parents are both dead. Who would be a guarantor for me? I can get a deposit together, but I really don't know anyone who would be a guarantor - and if I knew anyone who was prepared to back me like that and take the risk of me costing them money, I'd probably be asking for their support in helping me buy a house rather than rent. I don't think I'm that unusual, in not knowing anyone who could be a guarantor.

The only time I've seen guarantors used for housing was when I was a student, but that's generally a (comparatively) temporary situation. There have been quite a few changes to tenancy law since I was a student.

bochead Fri 07-Mar-14 20:27:29

Who does a professional person in their 30s- 40's ask to be a guarantor? The ex husband or wife? Give over. Giggling some more, who would a recent retired ask to be their guarantor? Their in debt up to the eyeballs after Uni kids?

daft, daft, daft and would rule out as tenants the very sensible mid-late life people who probably make the best tenants in terms of caring for your property.

I can see this perhaps working as a student let, but even then the absence of money up front in deposit is almost an invitation not to look after the joint.

Use a professional agency, cos this lot are not.

Sometimes LA's take on properties themselves on 5 year leases and undertake to do ALL the maintenance in that time. A few Uni's do too. That's the only time I'd consider not getting a deposit - when a council or university will be left holding the bill for repairs directly on a 5 year lease.

Ah sorry - LA means 'letting agent' not 'Local Authority' - duh. In that case use another agent - or don't use an agent at all. I don't. I wouldn't trust them. Joint the National Landlords Association - you can find all the contracts and legal info you need there. Credit check your tenants and do it yourself.

morethanpotatoprints Fri 07-Mar-14 20:33:25

The agent dealing with our property have asked our new tenant for deposit and they require a guarantor.
I think you'll find most that are members of whatever the organisation is, will ask for both. Is it ARLA?

familygermsareok Fri 07-Mar-14 20:33:51

Thanks everyone, that confirms my thoughts on it too. I think it is a daft system for all above reasons.

Unfortunately can't use another LA, it is a small rural island and only one LA there which is a subsidiary of a bigger firm ( it amazes me they would be doing this). I actually asked them with incredulity whether they had any tenants having problems getting guarantors and they said no, everyone should know someone who will trust them shock
I told them I wouldn't be able to find anyone myself and they just kind of shrugged!

Have considered just managing property myself but I live several hours away on mainland so not easy to get to in case of emergency, and unable to show prospective new tenants round if ever need to. Also happier having safety checks etc done by recognised agency.

Current tenants have been in for 3 years, always pay on time, no problems, really hope they stay. But if they do go in the future I will stick with deposit system.

TinyDiamond Fri 07-Mar-14 20:39:00

Are you sure they are not asking for a guarantor in addition to the deposit as well? This is becoming popular with agents where I live. A recently separated friend went through a total nightmare trying to rent somewhere despite earning enough.

Utter nightmare to not have a deposit though. This agent sounds idiotic I'd find a better one.

familygermsareok Fri 07-Mar-14 20:54:23

Cross posted with you morethanpotatoprints. Just googled ARLA, no my LA not on there, they are primarily estate agents who also do property management but are quite a big firm with multiple offices.

I have considered managing myself but the sheer logistics of getting to the property would make that v difficult, particularly if ever need to show new tenants around. I could probably do just as good a credit check as the LA though!

TinyDiamond yes, they are giving back the deposit. As LA is no longer holding deposits they are transferring it to me ( I will be putting in mydeposit scheme as legally required!).

I really struggle to see how expecting people to find a guarantor is reasonable, it is a huge request to make of someone, even family, and surely not everyone knows someone who is a homeowner/solvent/happy to put their own financial security at potential risk.
And as other posters have said there is no guarantee the guarantor would pay anyway!

morethanpotatoprints Fri 07-Mar-14 21:00:44

OP

Do check out what the EA are offering, it may not be worth paying the extra for them managing it.
Ours are offering the usual reading meters etc just for the initial cost.
We heard that when they manage your property the trades people they use are usually more expensive than those you would choose yourself. They have a list of particular ones they use, quite often they up the price for lls. If you manage yourself you can shop around for reasonable prices.

MidniteScribbler Fri 07-Mar-14 21:15:30

I wouldn't have anyone I could get to be a guarantor. My parents are both deceased, I have no other living relatives. I'd have no chance. What about newly arrived immigrants, they wouldn't necessarily have any options either?

Oldraver Fri 07-Mar-14 21:17:25

My son had to pay a deposit and find a guarantor me, despite having been a renter for a few years

Caitlin17 Fri 07-Mar-14 21:21:35

You have got the wrong end of several sticks here.

Firstly your letting agent should not be holding the deposit unless they enrolled you in and you paid for one of the insurance based schemes. There are 2 types of deposit scheme. One where the whole deposit is placed and the other where the landlord keeps it but pays a premium to the scheme provider so that if landlord defaults the scheme has to pay out.

In Scotland only the placement system applies.

No landlord or agent in England or Scotland should be holding deposits.

If deposits are properly placed they stay there until the end of the tenancy.

I think your letting agency is bull shitting to the nth degree. I suspect they are trying to offload deposits they haven't properly placed.

If this is an existing lease and the agency didn't place it properly the tenants can ask for it back. In Scotland they can ask the court to make you pay them 3xs the deposit as a penalty for not placing it.

For new tenancies there is nothing to stop you taking a deposit but you must put it in a scheme.

newbiefrugalgal Fri 07-Mar-14 21:28:32

Can you use the agents to just find the tenants the you manage it. So they are able to do checks and viewings.

Have a set of trades you trust and have these ready for emergencies. Maybe have backup ones too for peace of mind

NadiaWadia Fri 07-Mar-14 21:33:08

The Letting Agents sound awful. Why are they passing the deposit on to you to deal with? Surely this is part of what you pay them for?

My student DD has just signed up for a student house for the next academic year and needed a guarantor. A good thing her letting agency doesn't have such rigid rules as yours, as then because DH and I are renting ourselves, we would not be able to be guarantors because we are not home owners.

The agency should have been keeping informed, surely, if they wanted to do this? Remember, they are working for you, doing things on your behalf. You should call the shots.

luabay Fri 07-Mar-14 21:36:11

Anyone agreeing to be a guarantor needs their head checking, basically it's an agreement whereby if the tenant doesn't feel like paying for anything the guarantor is liable. So tenant moves in , decides not to pay rent, guarantor is liable. Tenant doesn't want to move out, since they live there for free, landlord is getting their rent so they're happy, guarantor is stuck paying for a contract between two people that they can't cancel. At least that's what the landlord likes to think. The whole concept is legally dubious on this basis in fact.

LessMissAbs Fri 07-Mar-14 22:03:23

Unfortunately can't use another LA, it is a small rural island

I suspect that's why they are doing this. Quite possibly on a small island, asking for a guarantor is more effective than a deposit. Deposits don't do an awful lot if the tenant stops paying. And tenancy deposit schemes are a hassle for both tenant and landlord if there is an issue over withholding part of the deposit for damages. I have heard in Scotland that there are few tenancy deposit schemes authorised and the ones which are half suffered from staff absentee issues which have led to big delays in returning deposits to tenants.

familygermsareok Fri 07-Mar-14 22:50:58

caitlin I suspect you may be right about the LA trying to offload deposits they haven't properly placed. We are in Scotland and the tenancy began before the legal requirement to hold in the mydeposit scheme. As a new first time landlord I just left the LA to deal with everything I thought that's what I was paying them for.
My understanding is that deposits now have to be placed with mydepositscotland and as soon as it has been transferred to me I will be placing it there.
I'm not sure if the LA or myself would be liable if tenants decided to take us to court if it hasn't been properly placed. Hopefully this won't be an issue as I am now trying to sort it and so far have had a good relationship with tenants.

morethanpotatoprints and newbiefrugalgal thanks, I hadn't thought about asking them just to do annual safety checks at individual costings without the rest of the management. I'm a little worried that LA may refuse to deal with me again though if I leave them now and just use for new viewings when needed. I would also like to have regular property checks done, the tenants have been very reliable and looked after the house well(although their agreed pets have multiplied a bit) but it is reassuring to know this is continuing to be the case.
Tenants and I already manage repairs/maintenance between us as the LA have been shit at this. We have an agreement that the tenants can contact any local trades person direct when required and invoices sent straight to me. They confirm with me first for sums over £150. So LA really do sweet FA for their money angry.

Caitlin17 Fri 07-Mar-14 23:27:07

OP all deposits in Scotland no matter when the lease started should have been placed by May 2013.

The Scottish courts have been ordering repayments and compensation payments. Any order would be made against you not the agency. It needs an application to be made to the courts by the tenants. Unfortunately it's in the tenants'interest to do so as it's a technical breach to which you have no defence. I hope they won't if you place it now.

Are you registered as a "fit and proper person" to be a landlord under The Anti Social Behaviour (Scotland) Act 2004?

Caitlin17 Fri 07-Mar-14 23:30:19

Oh and there are 3 approved Scottish deposit schemes. As far as I know they all work exactly the same way. I won't say which one I use as that might be unfair trading practice, but have a look at the web sites of all 3 and go with whichever you find most user friendly.

Mumof3xx Fri 07-Mar-14 23:32:08

With my LA you pay a deposit of a months rent, of you are under 25 you also have to have a guarantor

Caitlin17 Fri 07-Mar-14 23:34:23

Sorry more thoughts, I only use a letting agency to do viewings, find tenants and check references. I do all the legal stuff myself. On repairs I have my preferred very reliable, very honest tradesmen and tenants are,like yours, told to instruct them direct and bills get sent to me.

BillyBanter Fri 07-Mar-14 23:34:59

It's ridiculous. This is a business risk of the landlords not a risk tobe transferred to someone who takes pity on a friend or family member who can't get a flat otherwise.

Caitlin17 Fri 07-Mar-14 23:44:37

Billy it's not quite as simple as that. In Scotland for example it's virtually impossible to get rid of a tenant until there are 3 months'rent arrears. At that stage court action can be raised which, if not defended will add another 4 weeks minimum. A landlord potentially can receive no rent for 4- 5 months. If a tenant defends the action, no matter how spurious the grounds that can add several more months to the court process.

BillyBanter Fri 07-Mar-14 23:52:11

So get out of the business.

Caitlin17 Sat 08-Mar-14 00:01:59

You think it's reasonable a landlord should just suck up providing free accommodation for 5 plus months? For most businesses if your customers don't pay you stop supplying goods or services. A landlord can't do that.

Does it occur to you landlord might be paying a mortgage ? Is the bank going to allow non payment of that for 5 months?

Do you realise for example if during the time the tenants aren't paying rent the annual gas safety certificate falls due landlord still has to pay for that and for insurance?

Your posts are ridiculous or are you one of these people who think owning more than 1 house makes a landlord fair game?

BillyBanter Sat 08-Mar-14 00:12:00

I think there are business risks involved in being a landlord. If you are not willing to take on those risks you should not be a landlord.

Caitlin17 Sat 08-Mar-14 00:27:49

Believe that if you like.

Not having the ability to ask for a guarantor for a student or someone newly out of school/university won't make any landlord give up. They'll just take the tenants with the better job/better credit history. There's no shortage of tenants. But as you say weigh up the risks, if that means the younger person isn't offered a tenancy then on your argument that will be just fine.

BillyBanter Sat 08-Mar-14 00:41:41

You're right. People who neither live in nor rent a property are the ones who should be financially liable. That's a great system right there.

In other business there are some customers who don't pay up and the business has to chase them.

The housing situation in this country is fucked and increasing the number of private landlords and private lets is not the solution.

BillyBanter Sat 08-Mar-14 00:42:10

neither live in nor own a property that should be.

familygermsareok Sat 08-Mar-14 00:59:49

Caitlin thank you, that is useful information, I was only aware of one Scottish deposit scheme.
I have no idea if the LA placed the deposit appropriately by the required date. They have always been in charge of it, I have never had anything to do with it before. Kicking myself now for not checking with them. Stupidly I trusted them to do their job.

Will just have to hope tenants are not planning court action, will find out in due course, I am sure.

I am registered as a landlord on the Landlord Registration Scheme, the one that has to be renewed every 3 years, is that the one in the antisocial behaviour act 2004 you mentioned?

I am going to find out if deposit was placed appropriately, if not I feel I have good justification for withdrawing from LA and only using them to find tenants and do viewings as you do. I think they might be unwilling to do this ordinarily but if they have completely failed in a legal requirement ( presumption at this stage I know) I will be able to indicate clear reasons why. They charge extra anyway for finding new tenants and for all inspections. I have no idea what they actually do for the regular monthly fee!
I will be able to use money saved on LA fees to pay the fine for unplaced deposit grin

Caitlin17 Sat 08-Mar-14 02:06:01

Billy if you don’t pay your phone/electricity bill you will be cut off. If my office doesn't pay the many other businesses who supply us with goods and services they will stop supplying us.They won't continue to give us free supplies for 5/6 or more months.

A tenant can sit tight paying no rent for many months and there is nothing a landlord can do to stop supplying the "service". If there can't be guarantors for higher risk tenants the business decision won't be to stop renting out property. The business decision will be to not rent to higher risk tenants. By your argument, a valid assessment of risk and a valid way of running a business. Except that's not really what you're getting at is it? I suspect you probably think no one should be allowed to rent out a house.

AchyFox Sat 08-Mar-14 02:11:28

You agree to be the tenants guarantor in exchange for the deposit.

Problem. Solved.wink

AchyFox Sat 08-Mar-14 02:20:15

Doh blush

Caitlin17 Sat 08-Mar-14 02:23:56

OP Your letting agency is seriously out of order here. They have no business contacting your tenants and saying you no longer want a deposit They have no business deciding that their clients won't take deposits and will only take guarantors.

You should ask them:
What did you do with my tenants'deposit?
Why wasn't it placed in a scheme?
Why did you tell my tenants without any instructions from me their deposit was being returned?

familygermsareok Sat 08-Mar-14 09:24:31

Thank you. I will ask them all those. I really think I need to try and manage the property myself, I don't trust the letting agency at all now.
They have upset the tenants before by trying to unilaterally change their contract at the yearly renewal. I had agreed to allow some pets which I specified in original contract but LA tried to change to their bog standard no pets one. Again, all without asking me, when it was very clear that this was an individual agreement I had made with the tenants.

I really wish there was another LA locally, maybe they are so shit because of lack of competition.

How do you manage the legal stuff? Do you use a standard contract ( the kind you can download from internet) and modify it to suit you? And how do you manage regular property inspections?
I already have landlord insurance in place.

eggsandwich Sat 08-Mar-14 09:51:30

What I would say to you also as a landlord don't accept guarantor's for your rented property, we did once it was a man who got his mother to guarantor for him, after a few months he stopped paying his rent so we went to his mother for payment and guess what! she had moved out of the country and left no forwarding details and mobile number had changed where we could previously contact her.
So the guarantor system has flaws in it, I would also say that the LA are being crafty with insisting on the prospective tenants supplying a guarantor and would think that alot of landlords will give them a wide birth.

NurseyWursey Sat 08-Mar-14 11:22:57

Absolutely ridiculous. It's really hard for some people to find guarantors too. Luckily I used my stepdad. The company we went with asked really intrusive questions like how much he earns, his bank account details etc... Bound to put lots of people off.

Lara2 Sat 08-Mar-14 11:36:36

DH is a letting agent - deposit and a guarantor are standard and obligatory if tenants received housing benefit ( or universal credit?). Best of both worlds - damages come out of deposit, unpaid rent comes from the guarantor. We have a small house we rent out and whilst the tenant takes great care of the property, we have had to go to his guarantor almost every month for the rent.

Caitlin17 Sat 08-Mar-14 11:43:35

OP "yearly renewal" is not necessary in Scotland. If you grant a lease for the minimum 6 months it renews automatically at the end of every 6 months and continues to do so until one party serves notice. If the lease was originally for one year or more it renews automatically for another year.

Most leases now say they're for 6 months or a year and then month to month thereafter.

So far as legal side of it I am a solicitor. I don't tend to bother with inspections during the tenancy. I've never had problems with any of my tenants. If rent is always paid on time there's not likely to be an issue.

I don't have landlord insurance. I started renting out the first flat in 1999 and the second 18 months ago and so far have never had a bad tenant.

Caitlin17 Sat 08-Mar-14 11:58:51

I got really annoyed by a letting agents, who were a firm of solicitors in Aberdeen asking all sorts of nosey questions about me when I was my son's guarantor. I had no problem being one, I didn't argue about paying for the credit check (although it is actually illegal to charge for that)

I refused to give them any personal details other than my home address and am afraid did get a bit "do you know who I am?" with them. I'm not anyone famous but the emails and office headed notepaper gave more than enough comfort and I've seen my credit report. It's as good as it gets.

I also pointed out they had messed up making the lease a Short Assured Tenancy (the one landlords can end easily) which automatically means it is the other Scottish lease which landlords pretty much can't end until tenants want to go, but I'd make sure my son did leave when he was supposed to.

Mimishimi Sat 08-Mar-14 21:34:42

It's a really stupid idea. I can imagine the time and energy involved in chasing down the guarantors for any monies owed would be tremendous. Give your custom to another LA, on the mainland perhaps?

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