With new renter's right bill coming in I will likely no longer be able to have guarantors for my HMO tenants. What is the best way around this within UK law?
Chat GPT recommends multiple options and concluded a joint was the best option See details below. I have asked them for some clauses which I have added to my current contract which I would like advice on / to be reviewed.
Joint Tenancy Agreement: having the parent and the tenant sign the lease as co-tenants can be an effective strategy. Both parties become legally responsible for the rent and other obligations under the lease. This means if the tenant fails to pay rent, the parent, as a co-tenant, is also liable for making the payment.
Indemnity Clause in the Lease: You might include an indemnity clause in the lease where the parent agrees to cover any losses, including unpaid rent, that might arise from the tenant's failure to meet their lease obligations. This is slightly different from being a guarantor or co-tenant as it specifically relates to covering losses rather than taking on all responsibilities and rights of tenancy.
Payment Agreement: Another approach is to have a separate payment agreement with the parent. This would be an agreement where the parent commits to paying the rent on behalf of the tenant. It's a bit like having a guarantor but structured as a direct payment commitment rather than a fallback position.
Parent as a Primary Tenant: If possible, make the parent the primary tenant on the lease, and the actual occupant (their child) could be listed as a permitted occupant. This arrangement would make the parent directly responsible for the rent, although this could have other legal and practical implications, particularly in terms of the rights and status of the occupant.
“Both the Joint Tenancy Agreement and the Indemnity Agreement offer viable methods for securing rental payments and ensuring compliance with lease terms. Here’s a breakdown of the pros and cons of each approach to help you decide which might be more suitable for your needs:
Joint Tenancy Agreement Pros:
Legal Clarity and Simplicity: Both tenant and parent are clearly recognized as tenants, with both having equal legal responsibility for rent and other obligations. This makes the agreement straightforward and easy to enforce.
Joint and Several Liability: Each co-tenant is responsible for the entire rent and compliance with the lease terms, providing stronger security for the landlord.
Direct Involvement: Both parties are directly involved in the tenancy, which can lead to better care and maintenance of the property.
Legal Responsibilities for Parents: The parent is legally responsible for all obligations under the lease, not just paying rent, which could include liabilities for damages or other tenant responsibilities.
Indemnity Agreement Pros:
Flexibility: The parent is not a co-tenant but merely guarantees to cover certain losses, which can be more flexible for both the tenant and the parent.
Specific Coverage: The indemnity can be tailored to cover specific aspects, such as unpaid rent or damages, rather than all responsibilities under the lease.
Less Impact on Parent's Living Situation: Since the parent is not listed as a tenant, this does not affect their housing situation or obligations beyond the indemnity.
Cons:
Enforcement Challenges: Indemnity agreements can be harder to enforce compared to joint tenancies. The agreement must be very clearly drafted to ensure it is legally binding and covers all intended scenarios.
Limited Control Over Tenancy: The landlord has less control over the living situation since the indemnitor (parent) is not a resident or official tenant.
Potential for Legal Complexity: The agreement must be carefully crafted to ensure it is comprehensive and does not conflict with any legal statutes or tenant rights.
Decision Considerations Choosing between these options often depends on the specific circumstances and the relationship between the tenant, the parent, and the landlord. If the parent is willing to take on the responsibilities of a tenant and both parties want a straightforward legal relationship, a joint tenancy might be best. However, if there's a desire to keep the parent's involvement limited to financial backing without full tenancy responsibilities, an indemnity agreement could be more appropriate. Always consult with a legal professional to ensure that any agreement is appropriately structured and legally enforceable” I will probably go with the joint tenancy agreement and will need to add clauses such as; while this is a joint tenancy agreement, both named persons on the lease will be liable to pay the rent however only 1 can be in occupation.
