When do tenancy guarantees end?

GuaranteeThere is often misunderstanding and confusion about this.

  • Landlords will want a guarantee ideally to last the entire time a tenant is living in a property – and will often word their guarantee document to say this
  • Guarantors however will often assume that the guarantee will just last for the length of the fixed term.

What is the answer?  How long DO guarantees last? 

Here are some options:

Until the guarantee says it will end?

When considering any legal document you need to read it to see what it says about its time of ending.  So to a certain extent, this applies to guarantees too.  You need to read them to see what they say. 

It is possible for a guarantee to last longer than the fixed term of a tenancy – but only if it says so.  And only then if the clause that says so is ‘fair’.

In most cases, the guarantor will be a ‘consumer’ and so the guarantee document will be subject to the Unfair Terms rules, now part of the Consumer Rights Act 2015 (although they still work in the same way as the preceding unfair terms regulations).  

I have no legal authority for this, but if a guarantor signs a guarantee expecting it to last for the six months of the fixed term, I consider it would be unfair to hold that guarantor to their guarantee if, say, the tenant then lives in the property for the next 30 years.  There should be some way for the guarantor to end the guarantee if it lasts beyond the end of the fixed term.

Mind you most guarantees will end automatically anyway before then as they can only last

Until the tenancy changes significantly

This will normally be when the rent changes.

So if a guarantor agrees to guarantee a tenancy where the rent is £1,000 per month, the guarantee will end if the rent goes up to £1,500 per month.  Because that is not the tenancy he agreed to guarantee.  

You cannot alter the terms of an agreement without the consent of both parties.  So a guarantor cannot be held to the terms of the tenancy where the rent is different.  If the tenancy agreement specifically says that he will – that clause is will be unfair under the unfair contract terms rules.

The guarantor may also be able to object if a tenancy is changed significantly, for example, to allow the occupiers to change – say if one of the tenants moves out and someone else moves in.  As they did not agree to guarantee a tenancy where that new person was in occupation. 

Until the tenancy ends?

This is not the same as the tenant moving out. 

Technically all tenancies will end at the end of the fixed term.  But in most cases where the tenants stay on, the fixed term tenancy will be replaced either

  • by a new tenancy when the tenants sign a new tenancy agreement or renewal form.  Or
  • by a ‘periodic’ tenancy.  

It may be possible with a well-drafted guarantee, to extend it to apply to a periodic tenancy, but it is unlikely to survive after a new tenancy agreement has been signed.  As that new tenancy is not the tenancy the guarantor agreed to guarantee (unless perhaps all the terms and the rent are exactly the same).

So landlords and agents should always get guarantors to sign a new guarantee form at renewal.

Until the guarantee is ended by the guarantor?

An agreement can always be ended if both sides agree.  Apart from that, the parties can only end an agreement early if this is provided for in the guarantee deed.  

My view however has always been that a clause providing for a guarantee to extend beyond the end of the fixed term of a tenancy is more likely to be valid if the guarantee provides for the guarantor to end it by giving notice.  As otherwise the guarantee could be interpreted to extend over many years (if the rent remains constant) which would be unfair.  I have no authority for this though.

So when will a guarantee end?

To a certain extent, this will depend on the terms of the guarantee but in all cases, a guarantee will end

  • If the rent changes
  • If a new tenancy agreement is signed 
  • If both parties agree it should end

It is arguable that s guarantee may also end

  • If the occupiers of the property change (without a new tenancy agreement being signed), or
  • If the tenancy changes significantly in some other way – particularly if that could affect the guarantors liability under the guarantee

Other than that, it will depend on the terms of the guarantee. 

However, my view is that a clause that seeks to make a guarantor liable after the end of the fixed term is more likely to be found ‘fair’ (and therefore enforceable) if the guarantor is given the right to end the guarantee after the end of the fixed term period.

Note that my Landlord Law service has forms of guarantee available for members and a ‘guarantor’ friendly guarantee is also available via the Renters Guide website.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *