What is a guarantor? Guarantor vs co-signer on a lease

A guarantor is a person who promises in writing to pay a tenant's rent and other lease charges if the tenant does not. The guarantor does not live in the rental. Their promise gives the property owner a second person to collect from, which is why owners often ask for one when an applicant's income or rental history falls short of the screening standard.

This guide covers what a guarantor is, how a guarantor compares with a co-signer, when owners ask for one, who usually qualifies, what a guaranty agreement covers and a worked example. It is general information and is not legal advice. Rules vary by state and city. Check your local law or an attorney.

What is a guarantor?

A guarantor is a third party who backs the tenant's promise to pay. The tenant signs the lease and lives in the home. The guarantor signs a separate agreement, usually called a guaranty or a lease guarantee, that says they will cover what the tenant owes under the lease if the tenant falls behind.

Common guarantors are a parent backing a student or a first-time renter, a relative or friend with a steady income, and, in some markets, a company that charges the tenant a fee to act as guarantor.

What is a co-signer?

A co-signer signs the lease itself, next to the tenant. By signing, the co-signer usually becomes responsible for the lease along with the tenant, often "jointly and severally", which means the owner can collect the full amount from either of them. A co-signer usually does not live in the home either.

Guarantor vs co-signer

The two roles are close, and many leases and listings use the words for the same thing. Where they differ, the differences usually look like this:

	Guarantor	Co-signer
What they sign	A separate guaranty agreement	The lease, next to the tenant
Lives in the home	No	Usually no
When they are asked to pay	Often after the tenant fails to pay and the owner gives notice	Often from the first missed payment, the same as the tenant
What they are responsible for	What the guaranty says: all lease charges, or a set amount or period	Usually everything the lease says the tenant owes
Common use	Students, first-time renters, applicants with thin credit	The same, and sometimes a partner or relative added to the lease

What the signed documents say is what counts. Many guaranty agreements let the owner go straight to the guarantor once rent is late, and some co-signer clauses limit what the co-signer owes. Read the wording, and have an attorney review the form you use.

When property owners ask for a guarantor

An owner usually asks for a guarantor when an applicant is a good fit in every other way but misses one part of the screening standard. Common reasons:

• Income below the target. Many owners look for rent of no more than about 30% of the applicant's gross monthly income. The rent-to-income ratio calculator works out the ratio and the income a target needs.
• Little or no rental or credit history, such as a student or someone renting for the first time.
• New or irregular income, such as a new job that starts after the move-in date or income from freelance work.

Apply the same standard to every applicant. Offering a guarantor option on the same terms to everyone who misses the same bar keeps screening consistent and easier to explain.

Who usually qualifies as a guarantor?

Owners usually check a guarantor much the way they check the tenant: an application, proof of income, a credit check with written permission and a copy of an ID. Because a guarantor also pays for their own home, many owners ask a guarantor to meet a higher income bar than the tenant, and some ask that the guarantor live in the same state so the guaranty is easier to enforce.

Write your guarantor standard down before you need it, and use the same one every time.

What a guaranty agreement usually covers

A clear guaranty answers the questions that come up when rent goes unpaid:

1. Who and which lease. The guarantor's full name and address, the tenant, the property, the unit and the lease dates.
2. What is covered. Rent only, or rent plus late fees, repair costs beyond normal wear and tear and other charges the lease allows.
3. How much and for how long. The whole lease, or a cap such as a set number of months of rent. Whether the guaranty carries over to a renewal or a month-to-month period after the lease ends.
4. How the owner asks for payment. The notice the owner sends the guarantor, how it is delivered and how many days the guarantor has to pay.
5. Changes to the lease. Whether the guarantor must agree to a rent increase, a new tenant or a sublease before they apply to the guaranty.
6. Signatures and dates. Signed by the guarantor, with a copy for each person who signs. Some states set formal requirements for a guaranty, so check yours.

Keep the signed guaranty with the lease, and give the guarantor a copy of the lease it backs.

A worked example

An applicant wants a unit with rent of $1,800 a month and earns $66,000 a year. The owner's target is rent of no more than 30% of gross monthly income.

• Gross monthly income: $66,000 / 12 = $5,500.
• Rent-to-income ratio: $1,800 / $5,500 = 32.73%, above the 30% target.
• Income the target needs: $1,800 / 0.30 = $6,000 a month, or $72,000 a year.

The applicant's references and history are good, so the owner offers a guarantor option on the same terms it offers every applicant in this position. The applicant's parent earns $9,000 a month, and $1,800 / $9,000 = 20%, which meets the owner's guarantor standard. The parent signs a guaranty that covers rent and late fees for the 12-month lease.

In March the tenant pays $1,000 of the $1,800 rent. The lease sets a 5% late fee after a 5-day grace period, so the fee is $1,800 x 5% = $90. The tenant now owes $1,800 - $1,000 + $90 = $890.

The owner records the charge, the payment and the fee on the rent ledger, asks the tenant to pay first and, when the balance stays open, sends the guarantor a written notice with a copy of the rental invoice and the ledger, as the guaranty requires. The late fee calculator works out the fee from your own lease terms.

When the tenant does not pay

1. Start with the tenant. A reminder and a conversation settle most late payments.
2. Follow the guaranty. Send the guarantor the notice it describes, in the way it describes, with the amount owed and how you worked it out.
3. Keep records. A ledger with every charge, payment and fee makes the amount easy to check for the tenant, the guarantor and anyone else who reviews it later.
4. Use the right notice for the right problem. Unpaid rent usually has its own notice under state law. A broken lease term, such as an unauthorized pet, calls for a different notice, and the lease violation notice guide covers what to put in it.

A guarantor who pays the tenant's debt can usually seek repayment from the tenant. That is between the two of them. If you are thinking of court action against a tenant or a guarantor, talk with an attorney where the property is.

Rules that can apply

Some states and cities limit what an owner can ask of applicants, such as the total of deposits and other upfront amounts or how income is counted, and a few have rules about guarantors in particular. Fair housing law applies to guarantor requirements the same way it applies to the rest of screening. Rules vary by state and city. Check your local law or an attorney.

Frequently asked questions

What is a guarantor on a lease?

A guarantor is someone who signs a separate agreement promising to pay the tenant's rent and other lease charges if the tenant does not. The guarantor does not live in the rental.

Is a guarantor the same as a co-signer?

They are close, and many people use the words for the same role. A co-signer usually signs the lease and is responsible with the tenant from the start. A guarantor usually signs a separate guaranty and is asked to pay once the tenant falls behind. The signed documents decide which applies.

Does a guarantor have a right to live in the rental?

Usually no. A guarantor backs the tenant's payments and gets no right to live in the home. Only the people the lease names as tenants or occupants live there.

How long is a guarantor responsible?

For as long as the guaranty says. Some cover only the original lease term, and others carry over to renewals or a month-to-month period. Read the guaranty before a renewal, and ask the guarantor to sign again if it does not carry over.

Can a guarantor be removed from a lease?

Usually only if the owner agrees in writing. Owners often agree once the tenant meets the screening standard alone, for example after a raise, or when a new guarantor signs.

Keep each lease's payments and documents together

When a guarantor is involved, a clear record of what was billed and paid matters. In KeyRing, each lease keeps its rent charges, payments and balance, you can record cash and check payments, including partial ones, and overdue invoices are flagged automatically. Each month's rent invoices are drafted for you to approve before they are sent, each tenant gets a PDF invoice by email, and you can attach the signed guaranty to the lease it backs. See what KeyRing does or how plans are priced.