Guarantor problem

[fbnts]

Hi, My sister signed for a friend as a guarantor for a 6 month residential lease. I didn't know about it and she didn't understand the consequences.

I first heard of it when my sister received a CC'ed letter from the letting agents to the tenant regarding the unpaid rent. Apparently the housing benefit had not been received.

It turned out that rent has never been paid and that they were going to hold the tenant and my sister to the arrears.

I wrote to the letting agent for my sister to request a copy of all corespondeces and a copy of the lease/guarantor agreement.

They have sent a copy of the lease which contains the guarantor section as follows:

8.1 In consideration for the Landlord granting the Tenant a tenancy of the property, the Guarantor agrees to pay the Landlord and the Landlord's Agent for any reasonable losses suffered as a result of the Tenant failing to fulfil any of his obligations under this agreement or failing to pay Rents or ther monies lawfully due.
8.2 The Guarantor agrees to pay, on demand the in full, any overdue Rent or other monies lawfully due under this agreement for the full Term and until vacant possession is given to the Landlord.
8.3 The Guarantor agrees to make payments lawfully due under clause 8.1 or 8.2 even after the Tenant has returned possession of the Property to the Landlord.
8.4 If this contract is a "distance contract" as defined in the Consumer Protection (Distance Selling) regulations 2000, then, subject to the required information having been provided to the Gurantor, the 7 day "right to cancel" will cease immediately the provision of the service commences, in accordance with regulation 13(1)(a) of the above regulations. This means that you will be committed to this guarantor agreement once the Tenant takes on the Property.

That is all there is regarding the guarantor.

Is this enforcable against the Guarantor as its within a contract ultimately for the tenant and I thought a contact is only an enforcable contract if the person is being provided with something, which in this case a guarantor has nothing to gain from? If I had know about it, I would have made sure she didn't get involved!

Tom

[old_andrew2007]

Hello

Well in my opinion yes your sister is liable, she signed as a guarantor.
I am sure yous sister can request a copy of any contract she has signed, and should see a solicitor asap.

Regards

Andy

[Aequitas]

Originally Posted by fbnts

Is this enforcable against the Guarantor as its within a contract ultimately for the tenant and I thought a contact is only an enforcable contract if the person is being provided with something, which in this case a guarantor has nothing to gain from? If I had know about it, I would have made sure she didn't get involved!

You have homed in on an important point - there is no consideration passing between the guarantor and the landlord. The fact that a consideration is expressed does not change the position - there has to be consideration. I always maintain (though I am unable to quote any authority) that a guarantee needs to be made by deed.

Leaving that aside, there are two aspects to consider.

The first is whether the guarantor was made fully aware of the implications of signing the guarantee. There are no hard and fast rules here. What did the agent say? Was any suggestion made that advice should be sought? Do the terms of the guarantee reflect what was agreed? Is the guarantor obviously not worldly-wise?

The second is whether the terms of the guarantee are clear. In this case the drafting is very obviously amateurish. I have the following comments:

1. What exactly is a "reasonable loss"? It implies that there is such a thing as an "unreasonable loss". It is not clear from your post whether the tenant has been collecting rent benefit and not handing it over, or if the benefit has not been paid. Would either case be an "unreasonable loss"?

2. Clause 8.2 is ambiguous. Does it mean that you only have to pay until vacant possession is given, or that you only have to pay sums due up to vacant possession is given? It cannot be the case that you can be liable for both the full term and until vacant possession is given if vacant possession is given before the full term expires.

3. Clause 8.3 potentially conflicts with clause 8.2. Also, how can anything be due after vacant possession is lawfully given. Indeed, I wonder if it is possible to give vacant possession unlawfully!

The response should be:

A. The guarantee is unenforceable as it is not made by deed (assuming of course that that is the case).

B. Additionally or in the alternative, the guarantee is void as it terms are unclear.

C. Additionally or in the alternative,the guarantor was not advised as to the implications of signing the guarantee (assuming of course that that is the case).

[fbnts]

Thanks for your reply Aequitas, I didn't see your reply to the thread until today.

I shall find out what exactly she was told before signing the contract. As far as I can see, there is no deed, just one little section (which is quoted above) in the whole lease, with a signature box at the end along side the tenant, agent etc.

I will read through it all again to double check and then draft a response up here before sending it.

Thanks

Tom

[fbnts]

I have drafted the following.

Further to your recent letter, I have the following comments.


The guarantee is unenforceable as it is not made by deed but merely by a contract which, to be valid, would need to show consideration.


Furthermore, the terms appear to be unclear, giving that they are very ambiguous, and potentially contradictory. This would also make those terms void.


Additionally or in the alternative, I was not advised as to the implications of signing the guarantee. I was not advised to take legal advise before signing the agreement, nor was I informed of the implications that, if the terms were enforceable, I could face.


Based on the above I feel that no action can be brought against myself in recovery of any debt between your client and the tenant.


I wish you success in recovery from the tenant and would offer any assistance you may require in process.

Is there anything I should add or change?

Tom

[poochball]

Change Advise to Advice

[old_andrew2007]

Hi fbtns,
You could click on the red triangle, and ask for one of the site team to look at the letter, they may be able to point to some case law which you could include.

Regards


Andy

[slick132]

Hi Fbnts,

Hi, I was just passing by and this is not my field of expertise.

However, I would suggest the Guarantor asks a local solicitor for a free half hour Initial Consultation where she can take the Agreement and get advice.

I would NOT send the above letter until she's done this.

My view is that the Guarantee is, in principal, valid. I think the onus was on your sister to check out her obligations before she signed. Although the document is simple, it clearly sets out that she would be liable if the tenant did not fulfil their obligation to pay monies due under the rental agreement.

She should also press the tenant to get this sorted and see why Housing Benefit has not been paid to the landlord.

Is it possible the HB has been paid to the tenant, who has then failed to pay the LL.

This should be a warning to anyone signing such a guarantee - it could leave you financially exposed and you shouldn't agree to it unless you can afford to pay any arrears, and can fully trust the tenant to fulfil their obligations.

[fbnts]

Thanks for your replies.

The letting agent has sent another letter detailing the totals due including Rent due to the end of the lease.
Rent from end of lease to date of possession.
Court costs for possession
Costs for Warrant of Possession

They also attached the court order which orders the tenant to give possession and orders them to pay the costs and rent arrears.

Can the claimant claim the money from my sister (the guarantor) whilst they have a court judgement against the tenant?

Also, can my sister be liable for their costs in obtaining the orders against the tennant?

Thanks in Advance

[MrShed]

The answer to the first question is DEFINITELY no.

The answer to the second is almost certainly not.

[fbnts]

Ah ok, so would they need to withdraw the current Judgement before they can commence proceedings against my sister?

Tom

[MrShed]

IMO yes - IMO, it could even be classed as fraud. Basically the same situation as if you would make two insurance claims on one insurance loss.

[slick132]

Hi Mr Shed,

I'd be very interested to know the reasons for the two answers above.

I would have thought the Guarantor is still liable on both counts (based on personal opinion and NOT legal expertise) and would like to know why you thinks she's not.

[MrShed]

Because the landlord cannot claim the full costs from BOTH parties - this means he has doubled what he is entitled to. It sounds to me that the landlord has a judgement for the amount owed against the tenant, therefore he cannot claim against the guarantor.

[BankFodder]

Although the landlord could not enforce both judgments, I don't see any problem with obtaining a judgment against both individuals.

As far as consideration goes, there is nothing to prevent the benefit passing outside the contract. In general, consideration requires a detriment to the promisor. As far as I can see, that is the case here.