As a landlord renting to students, one of the most important considerations is whether to ask for a guarantor. This decision can significantly impact your financial security and the smooth running of your rental business. In this article, we’ll explore what guarantors are, why they’re essential for student lets and the benefits they offer landlords. We’ll also weigh up whether they’re always necessary and how you can handle tenants without a guarantor.
What is a Guarantor?
A guarantor is a person, typically a parent or close relative, who agrees to take responsibility for covering the rent and any additional costs if the tenant is unable to do so. For student lets, a guarantor plays a crucial role because many students, especially those in full-time education, may not have a steady income or established credit history.
In practice, if your student tenant defaults on their rent, the guarantor would be legally obligated to cover the shortfall. Many landlords request that the guarantor be a UK resident, employed and able to demonstrate a good credit score. This helps ensure that the guarantor is financially capable of meeting the tenant’s obligations if required.
Why Do Students Need a Guarantor?
Students are often considered a higher-risk tenant group due to their lack of income and the fact that many are renting for the first time. Without a guarantor, you may face difficulties recovering unpaid rent. This is why most landlords request a guarantor for student tenancies.
While students in university-owned accommodation may not require a guarantor, private landlords almost always do, unless the student is able to pay rent in advance or provide some other form of financial security. International students without UK-based guarantors might also need to provide additional upfront payments to secure a tenancy.
The Benefits of Asking for a Guarantor
Financial Security
The primary benefit of requiring a guarantor is the extra layer of financial security it provides. If your tenant struggles with rent payments, you can turn to the guarantor to cover the arrears. This significantly reduces your risk of financial loss, which can be important if you rely on the rental income to cover mortgage repayments or property upkeep.
Reduced Arrears Risk
In the event of non-payment, pursuing rent from a guarantor is generally easier than attempting to collect from a tenant directly. Guarantors often have a more stable financial position and a stronger incentive to keep the tenant out of debt or legal trouble.
Peace of Mind
For landlords, knowing that there is a financially responsible party backing the tenant provides peace of mind. This can be especially reassuring when renting to students, who may have no income other than loans or parental support.
Are There Downsides?
While asking for a guarantor can provide security, there are some potential downsides to consider.
Limits Tenant Pool
Requiring a guarantor can limit your pool of potential tenants. Some students, particularly international students or those from low-income backgrounds, may struggle to find a suitable guarantor. This could lead to longer void periods or the need to consider tenants who offer alternative arrangements, such as paying a larger deposit or several months of rent upfront.
Administrative Burden
Managing guarantor agreements can add administrative work. You’ll need to carry out checks to ensure the guarantor is financially capable and legally eligible. This involves collecting proof of income, credit checks and perhaps even legal consultations to draft a comprehensive guarantor agreement.
Alternatives to Guarantors
Not all students can provide a guarantor, so what options are available in these cases?
Rent in Advance
Some landlords accept a larger upfront rent payment instead of a guarantor. This could be three, six, or even 12 months’ rent paid in advance. While this offers a similar level of security, it may only be feasible for wealthier students or international tenants.
Guarantor Schemes
Some universities offer guarantor schemes for students who struggle to provide one independently. These schemes effectively act as a safety net, providing landlords with the same financial security that a private guarantor would.
Higher Deposits
Another option is to request a larger security deposit, though this must comply with legal restrictions in the UK, where the maximum deposit is five weeks’ rent.
When You Might Not Need a Guarantor
There are scenarios where you might decide a guarantor is unnecessary. For instance, if the student is able to pay rent in advance, or if they have a stable part-time job with enough income to cover their share of the rent, you might feel confident in renting without a guarantor. However, these situations are exceptions rather than the norm.
Asking for a guarantor when renting to students is a standard practice that provides essential financial protection. It reduces your risk of arrears, gives you a reliable fallback option and allows you to rent with greater confidence. However, it’s worth considering the impact on your tenant pool and whether alternative arrangements could be equally effective in specific cases.
Ultimately, the decision to request a guarantor should align with your individual risk tolerance and the profile of your target tenants.
Are you a landlord considering student lets or looking for more information on how to manage your rental properties effectively? At Nicholas Humphreys, we have years of experience helping landlords navigate the student rental market. Contact us today to learn more about our services and how we can support your property management needs.
