Student Guarantee with limited liability

Why do you have to go to the trouble of a ‘deed’? It’s all about enforceability again. A regular contract (not executed as a deed) needs to have 3 essential elements – An offer, an agreement and a consideration. A regular ‘guarantee’ does not have the latter and although a contract could specify that the landlord pays the guarantor £1 for his services as a guarantor, it is likely that a court would regard that as a device to bypass these requirements. I mentioned above ‘fairness’ and a contract would, of course, be covered by the Unfair Terms in Consumer Contract Regulations.

Before a deed of guarantee is signed, the guarantor must have seen a draft copy of the tenancy agreement they are signing and the landlord should specifically suggest the guarantor seeks legal advice (CAB / Law Centre etc) and give the guarantor time to do so. The landlord should, obviously, keep proof that he has done so. The matter of signing and witnessing a deed of guarantee is a quite complex matter. The safest way forward is for the guarantors to all sign on the same day the tenancy commences and be witnessed by a truly independent witness. This is sometimes not possible so in a later article we will investigate alternative methods of completing the guarantee.

The matter of signing and witnessing a deed of guarantee is a quite complex matter. The safest way forward is for the guarantors to all sign on the same day the tenancy commences and be witnessed by a truly independent witness.

The date a deed is signed does not have to be the date it is executed, though for clarity’s sake they are often one and the same. If the deed cannot be completed on the day the tenancy commences, a key thing to remember is that a guarantee cannot be executed before the relevant tenancy begins – why? – because it is not possible to guarantee something that doesn’t exist!

For this reason, our deed of guarantee does not have any date of completion/signatures, the only date on it is the date of execution, which is left blank until the tenancy commences.

Obviously, the idea of signing guarantees after the tenancy has begun is fraught with danger – a landlord has no recourse if he grants a tenancy and the guarantor subsequently refuses to sign. Indeed, why would a guarantor sign after the event? He has nothing to gain because the holy grail of the students tenancy has already been irrevocably granted.
So, where the ideal ‘everyone signs in the same place on the same day’ cannot be achieved, the only viable alternative is for it to be signed beforehand with an independent witness.

Who is a suitable witness?

A witness to your signature can be anyone. You are not going to be disputing that you signed and understood the deed that you are relying on in court therefore it is a non-issue.
If the deed is to be signed ‘face to face’ then I would argue that anyone chosen by the guarantor is acceptable, but the landlord should avoid his own employees, relatives or agents. Even neighbours could be construed non-independent. The purpose of the witness is to verify that the guarantor signed the document voluntarily, and the landlords ‘mate’ may forget to object to the psychological harassment / guilt trip that a dishonest landlord might put a reluctant guarantor through. On the other hand, the guarantors ‘mate’ or his ‘Aunt Joan’ would not sign if such actions took place.

But what if you can’t do face-to-face? Students parents almost never live in the same town as their off-spring are seeking a tenancy, often it is at the other end of the country. Or maybe it is Aunt Joan providing the guarantee because she is the one with the decent credit record. Do we expect an elderly Aunt to take a 200 mile train journey to sort out young Jennys paperwork? Well we might, but it is probably not practical.

In that situation, you may need to deal with this at arm’s length. Your problem is, how do you know that the guarantor and witness are real, not just alias’ of your prospective tenant or his pal? This is where the witness comes into his own as a safety net for the landlord, and yet a further complication.

The ideal witness for a long distance guarantor is a solicitor, he will check the guarantors identity and, if you ever need to take the guarantor to court, the court will see the solicitors stamp on the deed and accept that the guarantor voluntarily signed it. Some solicitors will witness such a document for £5/£10 in which case a landlord may agree to cover that cost. However, some solicitors will not want to witness such a document without first having ascertained the guarantors understanding of the deed and its implications. A solicitor is not going to sit down for half an hour with the guarantor proof-reading the guarantee and explaining it for a tenner. Lets add a zero onto that as an absolute minimum. It is ideal for the landlord to be able to show the court that everything was legitimately explained to the guarantor – indeed this is the most watertight of all the guarantee signing options – but is it worth the cost? Especially if you have 4 or more guarantees to execute on one property? A modest student house, £10k rent a year, 4% to guarantee it – you decide if you’re feeling lucky!

Another alternative in the £10 fee range is a GP, minister of religion or your prospective tenants ex-headmaster. In these cases, you don’t just want the signature on the deed, but proof it really is them – usually a rubber stamp is the best proof you can expect. Due to the witness’ status, you will be able to reassure the court that the guarantors’ signature is genuine and that there was no pressure. What it doesn’t do is provide any proof that the guarantor knew what they were signing.

To help combat that, our deeds include a bold warning in red advising the guarantor that the deed has possibly serious consequences and advising them to get legal advice.
Do not accept anything witnessed by an anonymous person. A quick Google will reveal dozens of tales of prospective tenants signing guarantees in Aunty Joans name (after getting the landlord to credit check Aunty Joan) and having them witnessed by their school friends. If you are taking the responsible step of obtaining guarantors, don’t let yourself down by allowing yourself to be tricked. Also, don’t be pressurised. If the guarantee paperwork is not in your hand, do not grant the tenancy. Do not offer to start the tenancy once the paperwork has arrived then allow tenants to move in ahead of the new tenancy start date – a tenancy is created at that point, no matter what the paperwork says.

A a very comprehensive e comment. Thank you I had always wondered on the in its of the law compared to the deposit scheme. The rough tough lesson in life system is to go after the richest parent and on e they are on the line they become your enforcer on the others. I got caught once with the late fifth person of a group. I knew the others I trusted and did not bother so much. She as a trusted third year for to be the group leader and did a bunk stealing 1000 from her mates and leaving her stuff in the room thus not exiting. Cost me too and I was furious at her abusing her friends.

Sometimes I care too much however one good group thanks to my efforts discovered the stressed mate could not afford the Uni fees and expected to earn 16k in a summer. The group were grateful to me and the previous witness became the next tenant. So a win for all I'm very pleased I made an excuse to hold off signing.

However in the world of students I think my good actions will pass like a ship in the night. However I feel good about it