Editor's note: This brief was summarised by The Property AI Newsroom from a report by PropertyWire. Read the original article for full details.
Legal Uncertainty Over Rent Guarantor Contracts After Updated Guidance
Updated government guidance on the Tenant Fees Act has raised questions about the validity of professional rent guarantor contracts issued before the Renters’ Rights Act comes into force on 1 May 2025. The Ministry of Housing, Communities and Local Government has warned landlords and letting agents that existing guarantor agreements may be affected by the new legislation, but the guidance does not specify what changes may be required.
The updated guidance clarifies that while tenants may choose a professional rental guarantor service, it becomes a prohibited payment if tenants are required to use a specific provider without being given the opportunity to select their own. The guidance states that guarantor agreements entered into before 1 May 2026 may be impacted by tenancy reforms in the Renters’ Rights Act. Guarantors are advised to review existing agreements and seek landlord consent for any necessary variations. The Ministry has not yet provided details on what specific changes may be needed.
Recent research referenced in the report indicates that following the legislative changes, around half of all tenants are likely to require a guarantor when entering a new tenancy. This development adds complexity to the rental market in England and Scotland.
Bruce Evans, Chief Commercial Officer at RentGuarantor, stated that the company has reviewed its customer contracts, including those established before the new rules, to ensure compliance. Evans also noted that agencies not offering tenants a choice of rent guarantor providers could be in breach of the Act, particularly if only one provider is recommended or if a tenant’s own provider is declined for reasons that suit the agent.
The guidance introduces potential compliance challenges for letting agents and landlords managing tenancies with existing guarantor agreements. The requirement for tenant choice in selecting guarantor services marks a change from previous practices, where agents often specified particular providers. Property professionals managing tenancies established before May 2025 now face additional administrative considerations as they await further clarification from the government on the specific variations required to bring pre-existing guarantor agreements into compliance with the new legislation.
Source: PropertyWire