How do co-signers and guarantors work on a lease?

Both a co-signer and a guarantor add a financially responsible adult to the deal. The difference is how much of the tenancy they share.

A co-signer typically signs the lease itself as a party to it. In many arrangements they hold the same payment obligations as the tenant, and sometimes the same right to occupy. A guarantor signs a separate guaranty. They promise to pay if the tenant defaults, but they do not live in the unit and hold no tenancy rights.

Landlords often use the two terms loosely. What matters is the exact wording of the document each person signs, not the label placed on it.

Consider a backer when an applicant is otherwise solid but thin on one factor. Common cases include students, first-time renters, recent graduates, and people with limited or rebuilding credit.

• Income falls short of your rule of thumb, such as earning two to three times the rent.
• Credit history is short or carries a few blemishes you want covered.
• The applicant is new to the area or has no domestic rental record.

A guarantor is not a fix for every red flag. If the concern is past behavior, such as repeated lease violations, a financial backer does not solve it.

Screen the guarantor with the same rigor you apply to the tenant. A backer only helps if they can actually pay when you call on them.

• Run credit and background checks, and verify income and identity.
• Expect stronger income than the tenant, since a guarantor still carries their own housing costs.
• Get the guaranty in writing, signed, and attached to the lease.

Spell out the scope in the document. State whether it covers rent only, or also damages, late fees, and any renewal term. What you can require and enforce varies by state, so check the guidance at the state law guides and confirm the language with your own counsel.

A few mistakes can make a guaranty worthless at the moment you need it.

• Accepting a verbal promise. An unsigned guaranty is hard to enforce.
• Skipping the guarantor's own screening because the tenant looked fine.
• Letting the guaranty lapse at renewal when the original term ends.

Keep the signed guaranty in your lease file so it is easy to produce later. Treat any change to rent or term as a reason to refresh the backer's consent in writing.