If you’re thinking about renting a property, you’ve probably come across the term “guarantor” in your searches, right? Perhaps you also know that getting a guarantor is one of the biggest concerns of the tenant, after all, the process can be time consuming and exhausting.
However, do you know what a guarantor is and how the rental of properties using guarantors as collateral works? In today’s post we at Sky Marketing , we’ll explain more about this type of rental guarantee, we’ll give tips on how to get a guarantor and we’ll also show you some alternatives for renting your next property!
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What is a guarantor and who can be one?
A guarantor is a natural or legal person who secures the tenant’s payment in a property lease. That is, the guarantor guarantees that, if the tenant does not pay the rent for any reason, the landlord will not fail to receive it, as he will assume the debt. As it is the least expensive lease guarantee, it is currently the most used in Brazil.
Most real estate agencies require two guarantors, usually from the same city where the property to be leased is located, and one of them must have assets—preferably, a property.
In the case of individuals, the guarantor’s income is required to be at least three times the monthly rent, plus charges (IPTU and condominium). In the case of legal entities, it is also necessary that the articles of association allow the company to be a guarantor. Furthermore, only partners can sign the lease agreement.
How to get guarantor?
A guarantor takes on a great responsibility when signing a lease, so it is recommended that you be a close and trustworthy person. Remember that the guarantor will also place great trust in you by accepting to be your payment guarantee. At Capital Smart City the developers have made sure to provide a guarantor.
The first option is to consult with the closest family members — parents, uncles and cousins — and then move on to friends or co-workers. You should check who would accept to be your guarantor and check that this person fulfills the above requirements.
It’s a good idea to show the potential guarantor that you will honor your commitments as a tenant, using your fixed income vouchers and other proof of financial stability. The last and least recommended option is to hire a professional guarantor, who will charge high fees to sign the contract and may not be as reliable.
How is the lease process using guarantors?
After choosing the property and agreeing the value with the owner through a reputable real estate agent, you will need to verify that the guarantors meet the aforementioned requirements and that they have the necessary income — three times the rent plus charges.
Then, you must present all the documentation of the parties, making a file that contains your documents, those of those who will live with you, and the documents of all the guarantors.
The so-called registration forms – which contain all the data of those who will sign the contract – will be analyzed to assess the financial health of those involved (it is verified that there are no lawsuits or debts, for example) and a response will be given to the proponents in a few days Useful.
If everything is fine, the contract can be signed and a date will be set for handing over the keys. If any form is not approved, don’t worry, you can present new documents or even new guarantors to guarantee the business.
What documents are required?
The documents required from individual guarantors are listed below. Remember that, in the case of married guarantors, the spouse must also sign the contract and present the same documents. Are they:
- RG or CPF;
- proof of address;
- last income tax return;
- proof of income (which proves to be more than three times the rent and charges);
- proof of marital status (birth, marriage, separation certificates).
The guarantor who owns the property must also present a copy of its updated registration number. The documents required from the legal entity are:
- CNPJ, State Registration;
- articles of incorporation and last amendment (must allow the company to be guarantor);
- proof of residence;
- identity document and proof of residence of the partners;
- last income tax return;
- last balance;
- two last trial balances;
- proof of goods (real estate or vehicles), if any.
What are the alternatives for those who do not have a guarantor?
If you cannot get a guarantor, there are other guarantees for renting the desired property. See what they are:
Surety bond
Currently, this is the second most used guarantee in Brazil, thanks to the ease of hiring, the advantages for the owner and the value — lower than the options we will mention below. The surety bond works like a guarantor, but an insurance company is responsible for the tenant’s debt.
Usually, the annual amount charged is one or two times the rent, but most insurers offer installments and other benefits — such as free residential assistance. You’ll find this option less expensive than the others, but it’s important to remember that nothing will be returned at the end of the contract.
Capitalization title
Capitalization bonds also work as insurance and, despite being more expensive than surety bonds, the money can be recovered at the end of the lease. The value of the deposit (or guarantee) must be negotiated directly with the owner and is normally between 6 and 12 rentals.
As the amount must be paid in cash, this becomes the least used alternative by tenants. Still, there are advantages: the ease of hiring (no proof of income required), free residential assistance, the drawing of prizes in cash made by some insurance companies and the fact that the amount is returned with correction at the end of the contract.
Security deposit
Finally, a simple way to guarantee the rent is to make a security deposit, paying the owner the equivalent of three rents at the beginning of the contract. This way, you will cover some risks and, if everything goes well until the end of the lease, you will receive the value back and Blue World City Islamabad makes sure that everything is in order.
What happens if you default?
If something happens and you are unable to honor the commitment made in the rental contract, the owner will resort to the chosen guarantee. If you have guarantors, they can be called by the owner after 10 days of delay in payment to settle the amount immediately.
It is important to remember that the guarantors will assume the tenant’s debt. If they also fail to honor her, her assets may even be pledged.
For surety bond, the insurer can be called when there is a default of more than two months. After paying off the debt, she will contact the tenant to make the settlement, and may take him to court if payment is not made.
In capitalization bonds, the owner may request the redemption of the amount after two months of default. Then, you can go to court if you do not reach an agreement with the tenant, filing an eviction action.
As you can see, guarantors are the most interesting way to secure a lease, as they don’t require upfront investment and don’t generate a lot of bureaucracy for the parties involved. However, as we said, there must be mutual trust between tenants and guarantors, as this commitment is a responsibility.
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