Is guarantor on lease personally liable

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DebiT
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Is guarantor on lease personally liable

Post by DebiT » Thu Jul 30, 2020 8:11 am

I am helping my 88 yr old mom move closer to me, and she will be renting a house. She has about $70K of investment assets, but will have a great deal more after she sells her house, after the move. She has only SS for income

When I was first looking for places, I told landlords I would just sign the lease, but my insurance agent pointed out that if she were sued for any reason connected with the house, I could be too, and would need to be on her renters ins and get her umbrella ins, and change mine.

If I am merely a "guarantor" not a "lessee", do I remove that problem?

Just asking for opinions, especially from landlords, I know no one can give me legal advice here.

Thanks so much
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

inverter
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Re: Is guarantor on lease personally liable

Post by inverter » Thu Jul 30, 2020 8:12 am

There is a separate concept of a guarantor, but the specific jurisdiction's laws will let you know whether or not you'd have liability.

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JoMoney
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Re: Is guarantor on lease personally liable

Post by JoMoney » Thu Jul 30, 2020 8:27 am

I would expect that if there was something in dispute, the lawyer would be going after anyone and everyone connected to the house that has the resources to make them whole... insurance companies, the owner, the resident, and anyone on the lease...
Whether or not they can get a judgement against any or all of them might be up to the court and the specifics of the situation that raised the matter.
If there is a "guarantor" on the lease, I would expect the lease for the place probably does have some verbiage spelling out what sorts of things they are guarantying / expected to be liable for, and that might make a difference.
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Kenkat
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Re: Is guarantor on lease personally liable

Post by Kenkat » Thu Jul 30, 2020 8:32 am

What is the reason for not just having your mother sign the lease?

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Thu Jul 30, 2020 8:58 am

She is signing the lease. She doesn't have enough income to qualify, so there is this guarantor section. I'm going to talk to the agent to see if her showing her investment statements, and also perhaps prepaying, might do the trick without me.
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

senex
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Re: Is guarantor on lease personally liable

Post by senex » Thu Jul 30, 2020 9:48 am

I like the idea of prepaying, or putting down an unusually large security deposit, etc.

A reasonable person should be open to that. Sometimes large corporations can be dumb about it ("policy," and all that). Hopefully you're dealing with the former.

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Thu Jul 30, 2020 10:06 am

Luckily a property manager agent, representing 2 adult granddaughters who inherited a house. I bet we can make it work. I also still have legal shield from my husbands business, and can call them for advice shortly if necessary.

My insurance agent essentially said, hmm, no one has ever asked that question. I get that so often! I don’t know if I just have an obsessive mind, or take things out to an unusual level, or what.

I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

Big Dog
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Re: Is guarantor on lease personally liable

Post by Big Dog » Thu Jul 30, 2020 10:11 am

DebiT wrote:
Thu Jul 30, 2020 10:06 am
Luckily a property manager agent, representing 2 adult granddaughters who inherited a house. I bet we can make it work. I also still have legal shield from my husbands business, and can call them for advice shortly if necessary.

My insurance agent essentially said, hmm, no one has ever asked that question. I get that so often! I don’t know if I just have an obsessive mind, or take things out to an unusual level, or what.

I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
I co-signed my kid's college lease and I made sure they/we had renter's insurance with liability coverage, all under my umbrella. Not sure this is any different.

Golf maniac
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Re: Is guarantor on lease personally liable

Post by Golf maniac » Thu Jul 30, 2020 10:14 am

As a guarantor you are only guaranteeing payment. Now this guarantee could be for damage of the property during the lease period. Just make sure she has renters insurance.

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Re: Is guarantor on lease personally liable

Post by Carefreeap » Thu Jul 30, 2020 10:57 am

DebiT wrote:
Thu Jul 30, 2020 10:06 am
Luckily a property manager agent, representing 2 adult granddaughters who inherited a house. I bet we can make it work. I also still have legal shield from my husbands business, and can call them for advice shortly if necessary.

My insurance agent essentially said, hmm, no one has ever asked that question. I get that so often! I don’t know if I just have an obsessive mind, or take things out to an unusual level, or what.

I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
Is she still driving? I would think that was the biggest risk. Get renter's insurance and if you're really paranoid get an umbrella policy for $1M.
Every day I can hike is a good day.

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Thu Jul 30, 2020 11:12 am

She's not driving. Honestly, she's not doing much of anything. But I am just a guarantor, so I think we are good. I'll check with LegalShield.
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

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galawdawg
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Re: Is guarantor on lease personally liable

Post by galawdawg » Thu Jul 30, 2020 8:43 pm

IANYL but generally a guarantor is indeed liable for payment of the debt of the borrower. The actual terms of the agreement and your state law will govern specifically. But as a general rule, if your mother was to default on any financial obligations to the landlord/property owner, you would be personally liable.

For the best advice, obtain a copy of the lease agreement and any accompanying guarantor agreements and have them reviewed by an attorney.

If you are uncomfortable signing as guarantor, you may wish to propose putting a substantial amount down as a refundable security deposit with a requirement that the landlord/property owner hold those funds in escrow only to be used in the event of financial default of the tenant, otherwise, to be returned to the tenant either at lease termination or after having demonstrated prompt payment of rent for a certain period of time.

Good luck.

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Thu Jul 30, 2020 9:39 pm

I’m not worried about the finances. I’m wanting to know if as guarantor but not lesser if I share liability for lawsuits. Granted that’s unlikely (mom doesn’t drive, rarely even goes out) but I still want to know. Waiting for Legalshield attorney to get back to me.
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BogleMelon
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Re: Is guarantor on lease personally liable

Post by BogleMelon » Thu Jul 30, 2020 10:35 pm

DebiT wrote:
Thu Jul 30, 2020 10:06 am


I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
It is amazing that I find this post now and I am 2 days apart from consigning my parent's lease as well after the landlord turned them down on their own even after offering 3-month rent in advance. Where we live (NJ) it is a landlord/seller market, and seems usually, landlords are unwilling to listen to offers or bother with changing their standard contracts.
I am anyways worried as well. I decided to enroll them in a renters policy for a maximum liability ($500K). I hope this ends up well.
Please let us know what Legalshield advised you.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

BogleMelon
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Re: Is guarantor on lease personally liable

Post by BogleMelon » Thu Jul 30, 2020 10:50 pm

Carefreeap wrote:
Thu Jul 30, 2020 10:57 am
DebiT wrote:
Thu Jul 30, 2020 10:06 am
Luckily a property manager agent, representing 2 adult granddaughters who inherited a house. I bet we can make it work. I also still have legal shield from my husbands business, and can call them for advice shortly if necessary.

My insurance agent essentially said, hmm, no one has ever asked that question. I get that so often! I don’t know if I just have an obsessive mind, or take things out to an unusual level, or what.

I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
Is she still driving? I would think that was the biggest risk. Get renter's insurance and if you're really paranoid get an umbrella policy for $1M.
If she is driving, how would that be a big risk to the OP, given that the OP is only consigning a house lease contract?
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Thu Jul 30, 2020 11:05 pm

BogleMelon wrote:
Thu Jul 30, 2020 10:35 pm
DebiT wrote:
Thu Jul 30, 2020 10:06 am


I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
It is amazing that I find this post now and I am 2 days apart from consigning my parent's lease as well after the landlord turned them down on their own even after offering 3-month rent in advance. Where we live (NJ) it is a landlord/seller market, and seems usually, landlords are unwilling to listen to offers or bother with changing their standard contracts.
I am anyways worried as well. I decided to enroll them in a renters policy for a maximum liability ($500K). I hope this ends up well.
Please let us know what Legalshield advised you.
Boglemelon

When I thought I might be a lessee along with my mom, my insurance agent told me to make sure I was named as additional insured on her renters policy.

Hopefully I'll hear from Legalshield tomorrow, else it won't be until Monday.
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

CurlyDave
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Re: Is guarantor on lease personally liable

Post by CurlyDave » Fri Jul 31, 2020 1:06 am

senex wrote:
Thu Jul 30, 2020 9:48 am
I like the idea of prepaying, or putting down an unusually large security deposit, etc.

A reasonable person should be open to that. Sometimes large corporations can be dumb about it ("policy," and all that). Hopefully you're dealing with the former.
As a landlord, prepaying does nothing for me. A jumbo deposit is good.

The reason is that prepaid rent diminishes over time, a deposit stays the same.

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Re: Is guarantor on lease personally liable

Post by galawdawg » Fri Jul 31, 2020 4:46 am

DebiT wrote:
Thu Jul 30, 2020 9:39 pm
I’m not worried about the finances. I’m wanting to know if as guarantor but not lesser if I share liability for lawsuits. Granted that’s unlikely (mom doesn’t drive, rarely even goes out) but I still want to know. Waiting for Legalshield attorney to get back to me.
Again, IANYL, but generally the liability would extend to any debts owed to the owner/landlord by the tenant (in this case, your mother) incurred as a result of her rental of the leased premises. As mentioned, the terms of the written agreement and state law would control.

Renter's insurance naming you as an additional insured should provide adequate protection for a catastrophic event, such as leaving a stove on causing a fire to the premises. Just be sure the liability limits are sufficient. If you have umbrella insurance, you may want to check with your carrier about adding the rented premises as additional coverage. I don't know whether they would do that, but it doesn't hurt to ask. They may require that your mother carry renter's insurance with them if they extend liability coverage to you under your umbrella policy. Check with your agent about that.

The best option to protect yourself would be to ask the landlord to accept a significant security deposit (three to six months rent if necessary) from your mother along with providing them with evidence of your mother's renter's insurance, including liability. Perhaps under those circumstances, they won't require a guarantor.

Good luck.

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Re: Is guarantor on lease personally liable

Post by BogleMelon » Fri Jul 31, 2020 8:27 am

DebiT wrote:
Thu Jul 30, 2020 11:05 pm
BogleMelon wrote:
Thu Jul 30, 2020 10:35 pm
DebiT wrote:
Thu Jul 30, 2020 10:06 am


I’ll bet lots of Bogleheads have financially co-signed on adult relative’s lease. Does anyone else worry about potential liability lawsuit? I don’t know if extra smart, or just plain crazy.
It is amazing that I find this post now and I am 2 days apart from consigning my parent's lease as well after the landlord turned them down on their own even after offering 3-month rent in advance. Where we live (NJ) it is a landlord/seller market, and seems usually, landlords are unwilling to listen to offers or bother with changing their standard contracts.
I am anyways worried as well. I decided to enroll them in a renters policy for a maximum liability ($500K). I hope this ends up well.
Please let us know what Legalshield advised you.
Boglemelon

When I thought I might be a lessee along with my mom, my insurance agent told me to make sure I was named as additional insured on her renters policy.

Hopefully I'll hear from Legalshield tomorrow, else it won't be until Monday.
Thank you for that tip. I emailed their renters insurance company asking them to add my name in their policy (I can legally email on their behalf using a POA), hopefully the company do that without a problem, it would be a big relief to me.
I like the idea that others said that you offer more of security deposit, now in a hindsight I wish I offered that instead of offering more prepaid rent which was turned down. For me it is too late already to try negotiating as the lease is ready for me to sign today, and they should be moving tomorrow! I however wish you a better luck taking a route that would both make you comfortable and bring your mum closer as you wanted.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Fri Jul 31, 2020 10:18 am

I too have already signed. The rental market is competitive here in San Diego. I am finally understanding what @galawdawg was trying to tell me, that as guarantor I am responsible for all tenant incurred expenses, not just rent. I’ll be having her get her renters insurance through my State Farm agent,so he can coordinate both of our needs. Sounds like high liability coverage, with me as named insured, should take care of things.

I hate that feeling of being exposed, but I guess that’s just life, and that’s what insurance is for. Maybe later we can rework this lease with a very deposit and proof of insurance. Property manager RE agent wasn’t open to me not being guarantor, saying he hasn’t met my mom. Oh well, surely when we renew the lease in a year, I can negotiate for this.
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

BogleMelon
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Re: Is guarantor on lease personally liable

Post by BogleMelon » Fri Jul 31, 2020 10:25 am

DebiT wrote:
Fri Jul 31, 2020 10:18 am
I too have already signed. The rental market is competitive here in San Diego. I am finally understanding what @galawdawg was trying to tell me, that as guarantor I am responsible for all tenant incurred expenses, not just rent. I’ll be having her get her renters insurance through my State Farm agent,so he can coordinate both of our needs. Sounds like high liability coverage, with me as named insured, should take care of things.

I hate that feeling of being exposed, but I guess that’s just life, and that’s what insurance is for. Maybe later we can rework this lease with a very deposit and proof of insurance. Property manager RE agent wasn’t open to me not being guarantor, saying he hasn’t met my mom. Oh well, surely when we renew the lease in a year, I can negotiate for this.
Thanks for the update. Confirming sentences like these gave me another relief:
- "I too have already signed. The rental market is competitive here in San Diego" [That made me think I am not seeing things in NJ market that doesn't exist, and a seller's marker is a thing]
- "I guess that’s just life, and that’s what insurance"
- "Sounds like high liability coverage, ..., should take care of things"

being not the only boglehead who co-sign a parent made me feel better. Thanks again!
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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gr7070
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Re: Is guarantor on lease personally liable

Post by gr7070 » Fri Jul 31, 2020 10:44 am

If her landlord is not a moron and she'll have a decent amount of equity she captures then her income won't matter.

Or if you prefer, she's 88, she captures say 300,000 in equity; add 50,000 to her current "income". Surely they're not asking for pay stubs.

As mentioned upline, pay extra down - likely not as security deposit (depending upon local laws this won't help landlord) but pay first two, three, four months rent and last month or two, or whatever.

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Re: Is guarantor on lease personally liable

Post by smackboy1 » Fri Jul 31, 2020 11:58 am

DebiT wrote:
Thu Jul 30, 2020 8:11 am
When I was first looking for places, I told landlords I would just sign the lease, but my insurance agent pointed out that if she were sued for any reason connected with the house, I could be too, and would need to be on her renters ins and get her umbrella ins, and change mine.

If I am merely a "guarantor" not a "lessee", do I remove that problem?

Just asking for opinions, especially from landlords, I know no one can give me legal advice here.
The answer is that it depends on state law and the specific legal language on the lease contract. But don't take lightly the responsibility by signing a guaranty.

The general answer is: yes, a guarantor may be personally liable for any monetary obligations of the tenant under the lease. And it might not just be for small things like rent and late fees. The lease may stipulate that tenant is liable for liquidated damages, or holding harmless the landlord under certain conditions, or any number of things without a monetary limit. The guarantor may also be liable for all of that too. For example, if there is a fire in tenant's unit that results in property damage and personal injury judgments that exceed the insurance coverage, it's possible the landlord will look to the guarantor for recovery. The insurance agent is right, make sure both of you have adequate and proper insurance coverage.

My own experience in a past life as a commercial landlord for risky tenant's I would want a personal guaranty in the lease for everything. And if the guarantor was married, I would want both spouses to sign the guaranty so I would be able to levy on property held jointly by husband and wife. Also, in some states and in some leases, it is not required for the landlord to exhaust their options going after the tenant first. When collecting judgments, I would name tenant and guarantor and aggressively go after everybody because that was the best way to collect.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.

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DebiT
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Re: Is guarantor on lease personally liable

Post by DebiT » Fri Jul 31, 2020 1:53 pm

Heard from LegalShield. As a guarantor, not a lesser, my liability is to the landlord, not other parties. So if she punches out the mailman (dark humor here) he can’t come after me, but if she doesn’t pay rent or burns the house to the ground, it’s on me. Renters policy, large liability coverage, me as additional insured, should be good. Seems that risk is confined to the total destruction of the (single family) house

My excellent insurance agent agrees.

As an aside, I used him for years for business, never wanted to switch from AAA for house/auto. Some years back I initiated getting umbrella because I realized iur assets were getting larger. I never spoke with actual agents at AAA, at least no one who inquired as to whether my coverages were adequate. Then I moved, AAA wouldn’t cover house because of brush fire proximity, so I switched everything including umbrella to my business State Farm agent. What a difference! For the first time in decades, I have that nice personal attention feeling you get when you can tell someone is trying to protect your interests. I like it.
Age 62, life turned upside down 3/2/19, thanking God for what I've learned from this group

BogleMelon
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Re: Is guarantor on lease personally liable

Post by BogleMelon » Fri Jul 31, 2020 4:39 pm

DebiT wrote:
Fri Jul 31, 2020 1:53 pm
Heard from LegalShield. As a guarantor, not a lesser, my liability is to the landlord, not other parties. So if she punches out the mailman (dark humor here) he can’t come after me, but if she doesn’t pay rent or burns the house to the ground, it’s on me. Renters policy, large liability coverage, me as additional insured, should be good. Seems that risk is confined to the total destruction of the (single family) house

My excellent insurance agent agrees.

As an aside, I used him for years for business, never wanted to switch from AAA for house/auto. Some years back I initiated getting umbrella because I realized iur assets were getting larger. I never spoke with actual agents at AAA, at least no one who inquired as to whether my coverages were adequate. Then I moved, AAA wouldn’t cover house because of brush fire proximity, so I switched everything including umbrella to my business State Farm agent. What a difference! For the first time in decades, I have that nice personal attention feeling you get when you can tell someone is trying to protect your interests. I like it.
I just cosigned them. I appreciate getting back and provided those details. Thank you very much!! Oh, and I agree how mediocre AAA are.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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