Guarantor: can anyone be one? Come and find out!

For many years, the guarantor was one of the most widely used guarantees when renting properties. Although it has lost popularity due to other models available on the market, it is still an option to be agreed upon in the rental contract.

Over the years, choosing a guarantor has become increasingly difficult. Firstly, whoever takes on this responsibility could face serious financial losses if the tenant fails to pay their debts.

Furthermore, the Tenancy Law determines some requirements that the chosen person must meet to assume this role. With so many rules and risks, it is not to be expected that other guarantees have taken their place.

Even with this change, there are still many people who choose and prefer to use it as a guarantee in the rental agreement. It is not easy, but you can find a guarantor who fits the rules.

If you are looking for a property to rent and are considering the possibility of using a guarantor, then you need to know all the rules to be followed so that the person can be held responsible for non-payment of your bills.

In this text, we will explain exactly what the Tenancy Law determines as mandatory for this guarantee, the most common doubts on this topic and what is necessary to assume this responsibility.

Check out the topics that will be covered:

• What is a guarantor?
• Why is it necessary to have a guarantor?
• Advantages of having a guarantor
• Does the guarantor have to have a clean record?
• Who can be a guarantor?
• Tips for getting a guarantor.

Happy reading!

What is a guarantor?

A rental guarantor is one of the rental guarantees that can be used in a rental agreement . He represents a person who will be responsible for covering any debts the tenant may incur if he fails to pay his creditor.

Furthermore, the guarantor can also be called upon in cases of legal proceedings, if the tenant's debts accumulate, including all fees and interest that may accrue the longer the required amount is not paid.

As a consequence, in addition to assuming the role of debtor, he will acquire a huge financial debt.

Its main objective is to speed up the activation of credit in these situations, so that the owner is not economically harmed. To this end, the Tenancy Law defines two types of guarantors that can be activated, depending on the situation:

• Joint guarantor - will assume responsibility for the debt as soon as it is incurred. In other words, he/she may be called upon at any time in any case of default;

• Subsidiary - will only be responsible for paying the debt after the assets registered in the settlement have been used. In other words, it will be a reserve figure, activated only if the contractor is unable to pay. This is the most common option in lease agreements.

The responsibility of taking on this role is enormous. For this reason, many people choose to hire people they trust - usually close to the tenant - who they are more confident will be able to pay for what is necessary.

Why is it necessary to have a guarantor?

A guarantor is one of the safest ways a tenant can provide rental security to the landlord.

With it, the landlord has the security that, in the event of default, he will not suffer financial losses due to non-payment of rent or other expenses. In other words, if the tenant does not fulfill his duties agreed upon in the rental agreement, the guarantor will be called upon to cover the amounts due.

As advantageous as it may be, this is also one of the main reasons that has made many reconsider taking on this role.

Most of the time, these people end up having to pay off a huge debt owed by the tenant, incurring a huge economic loss. Just imagine the loss that would occur if the tenant failed to pay months of rent.

Even with a good financial situation, there is no denying the risks. Especially if you have to bear other expenses, repairs or debts to be paid off.

All of these reasons have made it very common for guarantors to choose not to take on this responsibility. However, there are still many people who prefer to use it in their rental agreement.

This is because, disadvantages aside, having a guarantor also provides important benefits for the rental process.

As proof of this, around 46% of rental contracts in São Paulo included the presence of a guarantor in 2019, according to data released by the São Paulo Housing Union ( Secovi-SP ). Do you know why?

Advantages of having a guarantor

The main advantage of a guarantor for the tenant is being able to count on a rental guarantee without having to pay any amount.

This is because, if we compare it with other guarantees on the market, such as a bond or security deposit, the landlord will have to deposit a certain amount of money with the owner as a way of providing such financial security.

All of these other options are also safe and effective. But with a guarantor, you don’t have to worry about any money.

The rental process itself is also approved faster with a guarantor. This is because one of the rules required by law is that the guarantor must prove that he or she has the financial means and a good payment history in case he or she is called upon.

With such approval, it becomes much easier to speed up the approval of the rental contract.

All of these advantages also apply to the landlord, since he/she will not have to worry about suffering financial losses because of the tenant. Even if he/she does not receive a deposit in advance as is the case with other guarantees, any default will be returned.

Does the guarantor have to have a clean record?

Yes. One of the main rules required by the Tenancy Law is that the person who will assume the role of guarantor must not have a tainted name or any history of bad payment.

But beyond that, there are many other legal and bureaucratic issues for someone to be approved to become a guarantor.

Among them, the person responsible must be a legal entity or individual over 18 years of age, who can prove that they have an income equal to or greater than three or four times the value of the rent plus rental charges, such as condominium fees and IPTU.

Depending on the case, proof of at least one paid-off property in your name may also be required. And also, that it is located in the same city where the agreement will be signed.

Many real estate agencies may even require payment for two properties in your name as a way of providing even more security.

This is because, in some cases, the first property is considered a “family asset” and therefore important to maintain its dignity and structure. Therefore, the second property ends up being requested as a form of prevention.

There are so many rules that it is necessary to present a series of documents to real estate agencies and banks that confirm your financial stability. The process is long, but it is well worth it for the financial advantages it will bring to those involved in the rental agreement.

Who can be a guarantor?

Anyone can be a guarantor, as long as they meet the prerequisites determined by the Tenancy Law.

For individuals, the documents most requested as proof of their financial situation and history as a good buyer are:

• Identity documents (RG, CPF);
• Proof of residence;
• Proof of income greater than 3 times rent and charges;
• Declaration of the last Income Tax;
• Copy of the updated property registration (if you own property);
• Proof of marital status: Birth/Marriage/Separation/Death certificate.

For legal entities, the documents are slightly different. It is important to be aware of this difference so that approval by real estate agencies and banks does not take longer. Here are the documents:

• Completed and signed registration form;
• CNPJ and State Registration;
• Proof of address;
• Articles of Association and latest contractual amendment;
• ID, CPF and proof of address of partners;
• Latest balance sheet and 2 latest balance sheets;
• Latest Income Tax return;
• Proof of property, vehicles, or other assets, if applicable.

Tips for getting a guarantor

There is a whole bureaucratic process to be followed in order to become a guarantor. First, it is necessary to comply with all the requirements of the Tenancy Law. Then, the real estate agency and the banking institution must approve the request.

There are many steps and we know that it is a long process that can be quite tiring. However, if you want to have all the benefits of this type of guarantee, you need to go through it paying close attention to all the rules.

Even more so, considering that many people have started to rethink the possibility of taking on this role given the risks they may run. But don't be discouraged!

We have brought you some important tips that can help you choose the ideal guarantor for you. Take a look:

Search for people nearby

When starting your search for a guarantor, choose someone who is close to you and who you know well.

After all, it is a role that involves a lot of responsibility and risk. If the tenant fails to pay any debt, the guarantor will be charged the entire amount. And, depending on the amount, the financial loss could be enormous.

With someone close to you and someone you trust, it may be easier to find someone who will accept this guarantee. It could be from your group of friends or even from your family, with whom you will certainly be more intimate to ask for such a favor.

But remember: don't get upset if you get a negative response. After all, it's becoming very common for people to refuse this role, and there are many reasons for this. Make it clear that you understand the situation and that there's no problem with your refusal.

Choose someone who has the financial means

Even though it is already a prerequisite, it is important that you define these good financial conditions as a priority when looking for a guarantor.

Even if it is someone close to you, this affinity should not be the only criterion to be taken into consideration. Personal trust is not enough if you are not sure that the chosen person will be able to pay off the debts if necessary.

Whether it's through a stable income or, as we said, paying off a property in your name, make sure that your spouse has the financial means and that they won't be harmed as much if sued.

Be transparent

If you are looking for a guarantor, then you most likely do not have the financial means to provide another type of guarantee. Therefore, when looking for someone who is willing to accept you, you must always be 100% honest about your situation.

Explain your proposal, how you want to sign the contract, what your expenses will be and, most importantly, the chances of ending up in default for any reason.

Even if the scenario is very likely, it is important that the future guarantor is aware of the risks in order to decide whether or not to accept the proposal. As well as the conditions for his/her participation and what he/she should do if he/she is called upon.

This way, you will gain greater trust and credibility with the person, avoiding as much as possible any misunderstandings that may occur due to a lack of information about the guarantee agreement.

Offer means of guarantee or seek forms of bail

Another way to be transparent with the guarantor and gain their trust is to offer a means of guaranteeing that you will be able to cover all the payments for the property.

This way, he will be confident in taking on the role, even though the risk of being called upon continues to exist.

Now, if you have a lot of trouble finding a guarantor, be sure to consider the other types of guarantees provided for by law. Even if you have to pay a certain amount of money, they are just as safe as this model.

There are several options. Among them, the most recommended are the security deposit and the insurance bond . Both are becoming widely used in property rentals, providing financial protection for the tenant and the owner.

We even have complete articles about each of these models on our blog, if you want to know more about how they work and their benefits. Be sure to read them!

After all, it is always good to know all the possibilities so that you can choose the one that best suits your profile and needs.

Conclusion

All rental guarantees have their pros and cons, just like the guarantor.

It was once the most widely used model in rental contracts and, even though it has lost strength in recent years, it is still widely sought after. Mainly by tenants who do not wish to - or do not have - the financial means to pay as much as

guarantee.

It is important to understand each of these guarantees in depth to ensure that you choose the best option for you. In the case of a guarantor, remember to provide financial security to whoever takes on this role.

This way, he will be more certain that he will most likely be called upon to pay his debts.

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