A rental guarantee is a legal contract that ensures timely lease payments. A guarantor signs the document and guarantees payment if the lessee defaults. Landlords prefer lessees with good credit histories, but a guarantor can help those without. Guarantors take on risk and can be sued if payments are not made. Friends, family, or companies can act as guarantors.
A rental guarantee is a type of legal contract. It is used to ensure that a party granting a lease will receive the lease payments that are due in a timely manner. Basically, this type of situation creates an agreement of sale where one person agrees to pay the money owed in the event that the person who signed the lease defaults. One party, called a guarantor, who agrees to sign a rental guarantee document guarantees payment for another party.
Often, when a person has property, equipment, or assets to offer for leasing, they look for candidates with good leasing and credit histories. A landlord, who is a person who grants a lease, may give preference to these individuals because they are seen as less risky. Landlords want to get paid on time and those with good credit histories seem to be the most likely to follow through on this. In some cases, however, a lessor may decide to give the lessee, the person renting the property, a chance despite the fact that they lack good credit or an established leasing history. It can allow the person to sign the lease if he can get a guarantor with good credit to sign a lease guarantee on his behalf.
The guarantor in a lease guarantee situation takes a lot of risk in signing a lease guarantee form. Often people do this because they fully believe that the people they are helping will make timely payments. Unfortunately, this doesn’t always happen and the person in question could be in default on the agreement. This leaves the guarantor to take over the payments, although he usually receives no benefit from the leased property or equipment. If the guarantor cannot make the payments or refuses to do so, the lessor can sue him and the lessee in court; this could also cause the guarantor’s credit score to suffer.
Often times, people turn to close friends and family for help when they need a rental guarantee. For example, a person may ask his parents to be guarantor for his first apartment rental. Similarly, a person can ask his friend to be his guarantor for the equipment that he must rent to start a business. In some cases, however, a company can act as guarantor. For example, it can secure the payment of leases on behalf of foreign companies that have good risks.
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