Parents acting as guarantors for student tenancies could be held liable for damage or unpaid rent caused by other tenants they have never met, an expert has warned. Tim Wakelin, founder of Guarantor Insure, is urging families to read the small print of shared tenancy agreements carefully before signing.
Joint and Several Liability Explained
Wakelin warned that shared tenancy agreements could include “joint and several liability”, potentially allowing a landlord to pursue one guarantor for liabilities relating to the wider tenancy rather than simply their child's individual share. Under such an agreement, if another tenant stops paying rent or causes damage, a landlord may be able to pursue an individual guarantor for the full amount, depending on the wording of the agreement.
Guarantor Insure says the risk was the reason the business was originally created, after its founders experienced the issue themselves while acting as guarantors for their own children's student tenancies. Its cover is designed for private individuals, guaranteeing shared student tenancies where joint and several liability applies.
Renters' Rights Act Impact
The Renters' Rights Act, which came into effect earlier this year, stops an agent or landlord from asking for rent to be paid in advance, potentially meaning more parents, relatives and friends will be asked to act as guarantors for residential tenancies. Wakelin expects the issue of guarantors to become increasingly important across the wider rental market following changes as a result of the Act, including restrictions around landlords demanding large amounts of rent upfront. He believes that could result in more tenants being asked to provide a parent, relative or friend as a guarantor instead.
Wakelin said: “The biggest message to any parent who is asked to become a guarantor is: check the contract before you sign it. If you are joint and severally liable, then as a guarantor you could be asked to pay for damage or unpaid rent caused by the other tenants.”
Advice for Parents
Wakelin added: “Parents naturally think, ‘I know my son or daughter and I trust them, so I'm happy to guarantee their rent'. What they may not appreciate is that they could potentially be signing something much wider than that.” He noted that in a student house, parents may barely know the other people their child is moving in with, never mind their financial circumstances or their guarantors, yet depending on the agreement signed, their actions could potentially become the guarantor's financial problem.
Guarantor Insure's current product provides different levels of cover for student tenancy guarantors, including protection against qualifying unpaid rent and damage claims, alongside dispute resolution, legal cover and access to a legal helpline, subject to the policy terms. Wakelin said: “This isn't about telling parents they shouldn't help their children. For many students, having Mum, Dad or another family member act as guarantor is what enables them to secure the property in the first place.”
He concluded: “But signing a guarantee shouldn't be treated as a formality. You need to understand exactly what you're guaranteeing, how long that responsibility lasts and under what circumstances you could be pursued for money. The potential problem is that people sign because they trust the person they're helping, without necessarily appreciating that the agreement may expose them to the behaviour of everybody else sharing that tenancy. Read the agreement carefully, ask questions if you don't understand it and make sure you know the potential financial liability before putting your name on it. You wouldn't normally agree to guarantee the debts of a group of people you've never met without understanding the risks. A student tenancy shouldn't be treated any differently.”
