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spare
22-12-2011, 23:08 PM
After reading a couple of posts here, (I'm just reading everything here so please bear with me asking all of these random questions.) ;)
What makes it illegal for a letting agent to prepare a deed of guarantee?
Can a Landlord prepare one without a problem?
Lastly, wouldn't it be better to have the guarantors name on the AST and then a guarantor clause that tells them of their responsibilities if tenants stop paying rent etc. and then have them sign it as well. Has this way ever been tested?

Snorkerz
23-12-2011, 00:10 AM
After reading a couple of posts here, (I'm just reading everything here so please bear with me asking all of these random questions.) ;)
What makes it illegal for a letting agent to prepare a deed of guarantee?
Can a Landlord prepare one without a problem?
Lastly, wouldn't it be better to have the guarantors name on the AST and then a guarantor clause that tells them of their responsibilities if tenants stop paying rent etc. and then have them sign it as well. Has this way ever been tested?

A letting agent CAN write a deed of guarantee, he just can't charge for it. Without checking the caselaw it is deemed that he charges you for everything he does in his fee - so he charges for the deed, which is illegal.

Landlord can write such a deed legally - it's jus doubtful that without the relevant legal training it would be watertight.

Technically, the guarantor could be named as a joint tenant (joint and serveral liability) with no mention of guarantee anywhere, only one of the tenants has to live in the property. On paper this would give you the same protection. However, real tenant may not want this option as the (guarantor) tenant wold then have the power to give notice on the tenancy once it becomes a periodic tenancy.

For this same reason you may want to avoid this - if GT gives notice but RT does not leave you have no recourse for further debt/damage from GT.

PaulF
23-12-2011, 10:31 AM
Technically, the guarantor could be named as a joint tenant (joint and several liability) with no mention of guarantee anywhere, only one of the tenants has to live in the property.You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence. This seems a very strange suggestion!

jjlandlord
23-12-2011, 10:38 AM
You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence. This seems a very strange suggestion!

I think that what Snorkerz is saying is that as long as at least one of the joint-tenants lives at the property the assured shorthold status of the tenancy is not affected, so that an extra joint-tenant not living there could be added just to make him liable for the rent, etc.

HA 1988 s.1 indeed says that only one of the joint-tenants must occupy the property as his only or principal residence for the tenancy to be an assured tenancy.

spare
23-12-2011, 11:42 AM
On the AST it would have the tenants names and then underneath it would have the title "Guarantor" and then the guarantors name and address, they would then sign it at the back with the tenants under the title also of "guarantor". Would this then give them the ability to end the contract as they are not named as tenants, but as guarantor!!!

Snorkerz
23-12-2011, 12:31 PM
spare, you are asking questions that are really heading into the legal realm. Guarantees are notoriously difficult to make watertight and whilst we do have some legally qualifed membes on here, you might be better asking the question of a solicitor who specialises in L&T law. Sure, it will cost a few bucks, but nothing compared to the potential loses if you have a worthless guarantee.

Snorkerz
23-12-2011, 12:32 PM
You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence.And why would this be a problem?

PaulF
23-12-2011, 16:19 PM
Because a guarantor by definition is somebody who provides a separate security in the event of a tenant who is in breach. By your argument you might as well make all tenants their own guarantors which defeats the object of a guarantor altogether. A guarantor by definition is a third party who only comes into play if the original party is in breach and fails to honour the contract.

johnboy
23-12-2011, 17:38 PM
I dont know who is correct Paul F or Snorkerz but I have thought about putting a guarantor down as a joint tenant. Not only get the same security as being a guarantor but if you evicted via section 8 it would save doing a separate court action against the guarantor for any liabilty as they would both be named on any s8 eviction and ccj given.

Snorkerz
23-12-2011, 19:09 PM
Because a guarantor by definition is somebody who provides a separate security in the event of a tenant who is in breach. By your argument you might as well make all tenants their own guarantors which defeats the object of a guarantor altogether. A guarantor by definition is a third party who only comes into play if the original party is in breach and fails to honour the contract.I think you are being pedantic. I accept that my suggstion (which has it's negatives) does not give the landlord a guarantor - in deed I specifically stated that there should be no reference on the agreement regarding a guarantee - just joint and several liability.

Do you agree that even though the landlord would not have a guarantor per-se, he would have virtually the same protection from this non-resident tenant?

westminster
23-12-2011, 21:20 PM
What makes it illegal for a letting agent to prepare a deed of guarantee?
I think it's Part 3 of the Legal Services Act 2007 http://www.legislation.gov.uk/ukpga/2007/29/part/3


Can a Landlord prepare one without a problem?
Yes, anyone can DIY their own deed - it's providing/charging for such a service that's illegal if the provider doesn't have the necessary qualifications entitling him to provide the legal services (such as deed drafting).


Lastly, wouldn't it be better to have the guarantors name on the AST and then a guarantor clause that tells them of their responsibilities if tenants stop paying rent etc. and then have them sign it as well.
No, it wouldn't be better. There's a big different between the nature of contracts and deeds, and between the position of a tenant (who gains a benefit from the agreement to be liable for rent) and the position of a guarantor (who gains no benefit from such an agreement). The legally qualified members of the forum have repeatedly advised that a guarantee executed as a contract may be unenforceable, so it is highly advisable to execute it as a deed (and really not that difficult). Google deed/contract for more info on the difference between the two.

spare
23-12-2011, 21:29 PM
Having the guarantor named on the tenancy agreement, but not as a tenant would be the best alternative I would think, but the AST my friend has does it this way but the guarantee clause is short and doesn't list their liabilities etc the solicitors haven't really responded to him regarding this issue. If he added the full details under the guarantor heading of the same info that would normally be in a deed of guarantee and they also sign it, wouldn't that be the best of both worlds possibly.

westminster
23-12-2011, 21:34 PM
You cannot have a guarantor named as a tenant as it would not be their main or principal place of residence. This seems a very strange suggestion!

You can have a guarantor named as [joint] tenant, and he would be a legal tenant. As jjlandlord says, HA1988 only requires one of any number of joint tenants to be resident for it to be an assured tenancy. And if none were resident, it would be a common law tenancy.

Adding a G as a JT is how, I believe, some agents think that they can make a non-occupying party liable for the rent in the event of default. I believe, too, that it may often succeed; but it's also possible that the court would not accept it, if the nature of the arrangement became apparent to the court - i.e. if it became clear that the essential components of a contract were not present (which could easily happen if the G defended a claim).

westminster
23-12-2011, 21:36 PM
If he added the full details under the guarantor heading of the same info that would normally be in a deed of guarantee and they also sign it, wouldn't that be the best of both worlds possibly.
Again, no.

Executing the guarantee as a deed is the surest way to ensure it is enforceable.

spare
23-12-2011, 21:42 PM
Sorry our posts have crossed.

Of the three solicitors that I have spoken to, they have a guarantor clause in their ast agreements that is very brief and the guarantor also signs under the title guarantor. This "they" say is fine, but it does not list their liabilities so I just can't see it being ok or standing up to scrutiny.

westminster
23-12-2011, 22:04 PM
Sorry our posts have crossed.

Of the three solicitors that I have spoken to, they have a guarantor clause in their ast agreements that is very brief and the guarantor also signs under the title guarantor. This "they" say is fine, but it does not list their liabilities so I just can't see it being ok or standing up to scrutiny.
In my experience, it's not that unusual for solicitors - even ones who are apparently specialist in their field - to give bad advice.* You are right to question what they tell you.

Are the three solicitors you've spoken to experienced in litigation, and able to confirm a reliable end result, in court, of the guarantor clauses in the contracts they provide? Perhaps citing actual cases they've worked on, whether in the county court or higher?

* For example, this year I had something forwarded to me by my conveyancing solicitor who commented 'it all looks fine', but I knew it wasn't, so went to a specialist barrister, who confirmed it wasn't 'fine' at all. This is just one of many examples I could give.

spare
23-12-2011, 22:15 PM
When I questioned one firm they got very funny with me. They then sent the new AST with the amendments in it that I had mentioned and several other ones as well which I find shocking. The others also use the usual fall back, in that they should stand up in court but they can't tell me if they have been tested and no guarantee. But at present I think some of them would be classed as unfair terms IMHO.

Lawcruncher
26-12-2011, 19:39 PM
Yes, anyone can DIY their own deed - it's providing/charging for such a service that's illegal if the provider doesn't have the necessary qualifications entitling him to provide the legal services (such as deed drafting).

I think I may have inadvertently given the impression that you can draft a deed for someone if you do not charge for it. That used to be the case, but on reading Part 3 of the Legal Services Act 2007 it seems that now simply drafting a deed for someone is illegal. However, if I have missed something, the point is academic when it comes to letting agents because if the drafting is done as part of the service provided the agent will be deemed to have been paid for it even if he declares he has done the drafting for nothing.

johnboy
26-12-2011, 20:24 PM
So does that make any deed drawn up by a agent invalid???

mind the gap
26-12-2011, 20:26 PM
So does that make any deed drawn up by a agent invalid???

Apparently illegal, and by extension invalid?

Unless the agent is legally qualified...in which case he wouldn't waste his time being a letting agent.

jta
26-12-2011, 20:29 PM
I find it a bit puzzling because the landlord does employ the agent to act as if he were the landlord, so I cannot see why the landlord cannot have the G sign the deed in the presence of the agent and the agent sign as LL's representative. Otherwise we are going to have to advise people to make the journey back to UK, just to sign something, from as far afield as Australia.

Lawcruncher
26-12-2011, 21:18 PM
So does that make any deed drawn up by a agent invalid???

No, it does not.

Lawcruncher
26-12-2011, 21:34 PM
I find it a bit puzzling because the landlord does employ the agent to act as if he were the landlord, so I cannot see why the landlord cannot have the G sign the deed in the presence of the agent and the agent sign as LL's representative. Otherwise we are going to have to advise people to make the journey back to UK, just to sign something, from as far afield as Australia.

A deed is regarded as a solemn or formal document and has to be signed by the person making it or at his direction and in his presence. A guarantee does not in fact need to be executed by the landlord unless the landlord is agreeing to do something.

spare
26-12-2011, 22:52 PM
So can I ask why adding the guarantors name under the title guarantor in the AST on the first page where the tenants names are and they then also sign it with the tenants on the last page under guarantor. Then within the AST under the title Guarantor you would list all of their obligations and how to get out of them, wouldn't be as good as a deed, because surely then my only other choice is to take all of the tenants and the guarantor and book a solicitors appointment to go through the deed and their obligations and probably pay a hefty fee for the privilege.
Cheers

spare
26-12-2011, 22:58 PM
Sorry. Can I ask has anyone had any success in court with a guarantors agreement and which way did they go ie solicitor preparing it or clause in the AST. Or was it the case that the court unheld the guarantor without asking about the deed etc. As stated previously several solicitors do it with a clause in the AST.

mind the gap
27-12-2011, 08:15 AM
So can I ask why adding the guarantors name under the title guarantor in the AST on the first page where the tenants names are and they then also sign it with the tenants on the last page under guarantor.

Your first sentence in #24 (quoted above) doesn't seem to make any sense, I'm afraid. The second half (relating to the word 'Why...') seems to be missing. Please explain/complete, then we may be able to answer it.

Also, what do you mean by 'unheld the guarantor?'((#25), please? Do you mean 'let them off' or 'held them to' any obligation as G?

jta
27-12-2011, 08:29 AM
A deed is regarded as a solemn or formal document and has to be signed by the person making it or at his direction and in his presence. A guarantee does not in fact need to be executed by the landlord unless the landlord is agreeing to do something.

So if the G signs it as a deed in the presence of an independent witness (i.e. not the agent for the landlord) it should be valid for the LL's purpose? Have I got that right?

Lawcruncher
27-12-2011, 09:00 AM
So if the G signs it as a deed in the presence of an independent witness (i.e. not the agent for the landlord) it should be valid for the LL's purpose? Have I got that right?

There are two separate questions:

A. Is the deed validly executed?

B. Is it enforceable?

As to A a deed is validly executed if executed in accordance with section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 http://www.legislation.gov.uk/ukpga/1989/34/section/1 It will be noted that there is no requirement for the witness to be independent. However, when lawyers send deeds to clients for execution they state that the witness should be independent, without usually defining what they mean by that.

As to B, guarantees are of such a nature that, even if validly executed, they may be unenforceable for a variety of reasons. Whilst the witnessing of a guarantee by the landlord's agent does not automatically render it unenforceable, it raises the suspicion that the guarantor was not properly informed of the effect of signing the guarantee.

jta
27-12-2011, 09:46 AM
Thanks LC.

westminster
27-12-2011, 22:17 PM
As to B, guarantees are of such a nature that, even if validly executed, they may be unenforceable for a variety of reasons. Whilst the witnessing of a guarantee by the landlord's agent does not automatically render it unenforceable, it raises the suspicion that the guarantor was not properly informed of the effect of signing the guarantee.
Indeed. I've recently had to have a Deed executed relating to a loan of money (from me to another party). My solicitors said that they needed a letter from the loanee's solicitors confirming they'd explained the implications of signing the Deed, in order to protect me from anyone arguing that the loanee didn't fully understand the effect.

westminster
27-12-2011, 22:31 PM
As stated previously several solicitors do it with a clause in the AST.
As previously stated many solicitors give poor advice, and/or have no experience in litigating with this issue etc. Ask the solicitors who advise doing it with a clause in the AST whether they have any evidence that it'll stand up in court.

Snorkerz
27-12-2011, 23:15 PM
I accept that my suggstion (which has it's negatives) does not give the landlord a guarantor - in deed I specifically stated that there should be no reference on the agreement regarding a guarantee - just joint and several liability.

Do you agree that even though the landlord would not have a guarantor per-se, he would have virtually the same protection from this non-resident tenant?

I am repeating post #10 as Paul_f hasn't been able to reply and Lawcruncher & Westminster are now reading. This is in relation to having the "guarantor" as a joint AST tenant instead. Your opinion folks?

Lawcruncher
27-12-2011, 23:51 PM
A possible snag in making a guarantor a tenant is that it may prejudice a claim for housing benefit.

Also, it has to be doubted that many students would want their parents to be co-tenants!

Remember a co-tenant can bring a periodic tenancy to an end, whilst a guarantor cannot.

From a guarantor's point of view it complicates his position if he has to claim against the "true" tenant and it may also make him liable to pay rates.

On the whole best to keep tenants and guarantors separate

spare
28-12-2011, 00:14 AM
I have asked the sols in question and they just said they have had no problems, which I don't believe.
Anyway back to my earlier post I meant to say has anyone had either a deed upheld that an agent has undertaken or not and also my other point was: on the front page of the AST where the landlords name is and tenants name you then add the title guarantor and add their name and address, the same on the page that they sign, as they only sign it as a guarantor not as a tenant and then within the AST their is a title of guarantor which then proceeds to tell them about their full liabilities and how to get out of them etc would this not be a better way than as I said earlier dragging them all to a solicitors office to sign a deed. Or not a better way but acceptable to stand up in court . Cheers

westminster
28-12-2011, 01:07 AM
I have asked the sols in question and they just said they have had no problems, which I don't believe.
Anyway back to my earlier post I meant to say has anyone had either a deed upheld that an agent has undertaken or not and also my other point was: on the front page of the AST where the landlords name is and tenants name you then add the title guarantor and add their name and address, the same on the page that they sign, as they only sign it as a guarantor not as a tenant and then within the AST their is a title of guarantor which then proceeds to tell them about their full liabilities and how to get out of them etc would this not be a better way...
*sigh* Once again, NO, it's not 'better' to put a guarantor on a contract and not execute the guarantee as a Deed. And I'm not sure why you might think it is better when you also say you don't believe what the solicitors have told you - ?


"...than as I said earlier dragging them all to a solicitors office to sign a deed.
A deed doesn't have to be executed in a solicitor's office.

spare
28-12-2011, 23:53 PM
How is it best to execute the deed?

spare
06-01-2012, 22:56 PM
So the best way is to let the solicitor prepare the deed in advance and then I can sign the deed with the tenants on the day of the start of the tenancy at the property.
NB: they always have a copy of the ast and deed at least 10days before signing.

Snorkerz
07-01-2012, 11:16 AM
How is it best to execute the deed?

The document must have the wording "executed as a deed" and the tenants signature must be witnessed by an independant witness. That's it.