Did you know you can ask tenants for a co-signer?
Your tenants filled out an application and you ran a credit check (hopefully). You have a good feeling about them (or maybe you don’t) and now it’s time to sign the lease…
Wait! Did you know asking for a consigner or a guarantor costs nothing? And it can save you big cash if things go wrong.
Having another person who is responsible for rent payment and potential damages is a huge plus, especially in cases where the candidates don’t have awesome credit, or when they’re young, at school or in some other kind of precarious financial position.
Here’s how you should proceed.
- Inform applicants early in the application process that impeccable credit, references and sufficient income to pay the rent is necessary ***a “healthy” financial situation is one in which rent/housing expenses comprise 33% of gross income***
- If any of these criteria are not met, inform the candidates that you’ll consider renting to them if they provide a consigner who meets these criteria.
Make sure you run your application on the consigner!
Now it’s time to add the consigner to the lease document.
- Depending what type of lease you’re using, there may be an existing clause to add a consigner. If so, use it but make sure it contains some version of the following:
- Person x (the consigner) agrees to act as a guarantor for person y (tenant) (and person z, and person w… if there are multiple persons on the lease) ; this is important because you don’t want a guarantor covering only part of the rent, in case, for example, one tenant doesn’t pay while the other does
- Person x is jointly responsible for rent payment, damages, and any other expenses related to the occupation of the unit (remember your tenants may bring bugs, break things, cause problems for other residents). You want the guarantor responsible in all of these situations
- “Person x shall remain as guarantor for this lease and any successive lease-renewal periods.” Most residential leases have automatic renewal clauses. Make sure the guarantor remains on the hook even if the lease prolongs itself automatically.
- Finally, “All signatures on the lease are jointly responsible for payment of rent, any damages or any expenses related to occupancy”. Again, with this, you’re avoiding the famous “I’m only responsible for my part” argument.
Last but not least, make sure you get everyone’s details up front (social insurance number, permanent address, bank information). If ever things go wrong in the future, better to have a complete file should you need to pursue parties for damages, bank seizures and so on?