If you are a leasing agent then you most likely recently turned down a tenant due to their negative credit report. This is the unfortunate reality of our time. However, when this happens –all is not lost so long as the tenant can find someone who can guarantee their financial obligations and responsibilities towards their unit.
Having a guarantor to a lease agreement is a common and popular tool especially during our current economic environment where many applicants have problematic credit scores. The basic function of the lease guarantee is to hold a third party responsible for all unpaid amounts in connection with the tenant’s obligations under the lease. Of course, as a practical matter you should run a credit check against the guarantor to determine if he/she will make a proper guarantor. Once the guarantor is identified and vetted, you are ready to draft the guarantee. For the guarantee to be effective and to hold up in court, the lease guarantee should, at a minimum, have the following elements and structure:
The lease guarantee should be a separate document and should contain language that specifically references and relates back to the lease. This will prevent the guarantor from later asserting a lack of knowledge about what responsibilities were being guaranteed. It is good form to provide the guarantor with a copy of the lease (and even a copy of any future lease modifications, changes, addendums, extensions and renewals) and have the guarantor sign an acknowledgment that they received a copy of the same and acknowledge the obligation therein.
The guarantor should be clearly identified in the guarantee agreement and should sign and date the lease guaranty form before 2 witnesses and a notary.
The guarantor should not sign the lease. Only the occupants of the unit should sign the lease. In other words, the lease guarantee should be a separate and distinct form from the lease.
The lease guarantee must be in writing and be very specific as to the obligation being guaranteed and the time period for which the guarantor will be guaranteeing the lease. If vague and lending itself to different interpretations and meanings, you run the risk that a court will not uphold the ambiguous language with respect to the terms of the guarantee, effectively eviscerating the guarantee.
If your lease has renewal or extension language, in order for the guarantors obligations to continue during this new lease period, the guarantee must contain language that makes it clear that the guarantor is also responsible for any subsequent lease renewal and/or extension. Otherwise, you will unintentionally not bind the guarantor for lease renewals and extensions terms. Of course you also want to make sure your guarantee covers addendums, amendments,modifications and changes to the lease terms including increases in rent.
Whether you own a few properties or hundreds of properties in Florida, Octazon Management, LLC is here to simplify property ownership and management. We can help you manage any and all of your properties. At Octazon we provide simplicity & peace of mind. Call us 888-324-9528 or email us email@example.com today.