Finding a suitable tenant who is reliable and has excellent references is the hope of most landlords, but their primary concern is ensuring the prospective tenant will pay the rent. Tenants will need to provide a security deposit to be held against damages, but monthly rental payments are ongoing. Landlords don’t want to have to deal with the nuisance of chasing up money owed, or go to the expense of evicting non-paying tenants. Requesting a co-signer reduces the risks a landlord takes when letting their property.
Landlords mitigate the risk they take by requesting a copy of the credit report of the potential tenant, with the tenant’s permission. Those with poor credit or no credit are unlikely to be welcomed unless a co-signer is willing to stand as guarantor for the rent. Students and those embarking on their first jobs present risk, as they may not have established a good credit history yet, or have low incomes. Additionally those with foreclosures or bankruptcies recorded on their credit reports may need a co-signer to fulfill their rental property requirements.
Co-signing any kind of financial agreement is a risky endeavour. Those who are considering co-signing a rental agreement should be aware they are equally liable for the payments if the tenant fails to pay, though they have no equal rights to move into the property. Some landlords require a co-signer to be resident in the same area, thus excluding family members as co-signers if they live in a different area or state.
Guarantors need to be aware of the risks which they undertake if they co-sign a rental agreement. They will be liable for the payments until the rental lease expires. This will show on their credit report as an obligation which may reduce their own likelihood of obtaining loans or credit. If the tenant fails to make payments, this will have a detrimental affect on the co-signers own credit unless they make the missed payments.
Landlords have the legal right to pursue a co-signer for any outstanding payments. They can hold the co-signer liable for the remaining payments until the lease expires if the tenant breaks the lease or moves out. Furthermore guarantors are also equally responsible for paying for any damage to the property, even if accidental. Anyone considering becoming a co-signer should ensure the tenant has adequate renter’s insurance cover to limit any potential risk.
Additionally the co-signer should comb through the rental agreement and discuss with the landlord when they can expect to be released from their role as co-signer. It would be prudent to have their name removed when the rental comes up for renewal, providing by that time the tenant has proved to be responsible enough to no longer require a co-signer.
Co-signing any kind of financial agreement is a risk not to be undertaken lightly, and rarely advisable. It can be a hazard where rentals are concerned; this is because a co-signer could well end up paying rent on a property they have no legal right to enter, even after a non-paying tenant has been evicted.