Renters Rights Act sparks surge in rent guarantor use
The Renters Rights Act has caused a 50% increase in rent guarantor applications within three months, as landlords adjust to new limits on upfront rent payments.
The Renters Rights Act, effective since May this year, restricts landlords from requesting or taking more than one month’s rent upfront. This change has led to a significant rise in landlords requiring rent guarantors to secure tenancy agreements. According to Graham Hayward, managing director of guarantor firm Housing Hand, the volume of rent guarantor applications has grown phenomenally in the last 100 days as landlords seek to manage the risks introduced by the new legislation.
Hayward noted that while demand for guarantors has surged, the number of claims for missed rent has not increased, remaining consistent with previous years. Housing Hand has paid out around £7 million in claims over the last five years, averaging £1.5 million annually, and this average has not changed since the Act’s implementation.
How the Renters Rights Act reshapes landlord risk management
Before the Act, landlords commonly requested several months’ rent upfront as a form of financial security. The new law caps this at one month’s rent, reducing landlords’ immediate cash flow protection against rent arrears. To compensate, many landlords now require rent guarantors, who legally commit to covering rent if the tenant defaults.
Guarantor firms like Housing Hand also assist landlords with enhanced Know Your Customer (KYC) checks, including verifying income, screening for sanctions, and identifying Politically Exposed Persons. This additional due diligence helps landlords comply with regulatory requirements and mitigate risks associated with tenant fraud or financial instability.
Despite the increased reliance on guarantors, the steady number of missed rent claims suggests that guarantor arrangements are effectively managing the new risk profile. Landlords who proactively engage with guarantor services appear to have adapted well to the changes.
Implications for landlords and letting agents
For landlords, the shift means reassessing tenant vetting and tenancy security procedures. Relying on guarantors introduces new administrative tasks, including verifying guarantor eligibility and managing guarantor agreements. Letting agents may also see increased demand for guarantor services as part of their tenancy application processes.
Landlords should ensure their tenancy agreements clearly outline guarantor obligations and understand the legal standing of guarantor contracts under the new Act. Additionally, they must stay informed about compliance with KYC and anti-money laundering regulations, which are increasingly integrated into guarantor vetting.
Letting agents will need to update their application procedures and advise landlords on the practicalities and legalities of rent guarantors. This includes managing documentation and ensuring that guarantor checks are thorough and compliant with current standards.
Ongoing uncertainties and areas to monitor
While the initial data shows stable rent claim volumes, the longer-term impact of the Renters Rights Act on rent arrears and tenancy sustainability remains to be seen. It is unclear whether the increased use of guarantors will fully offset the reduced upfront rent payments in all market conditions.
Landlords and agents should watch for any government updates or guidance clarifying the scope of permissible tenant screening and guarantor requirements under the Act. Changes in enforcement or interpretation could affect how guarantors are used and the protections available to landlords.
There is also uncertainty about how guarantor firms will evolve their services to meet growing demand and regulatory expectations. The balance between tenant protection and landlord risk management will continue to be a focus of rental sector policy discussions.
Practical steps for landlords to consider now
- Review tenancy agreements to ensure guarantor clauses are clear and legally sound.
- Vet guarantor firms carefully, focusing on their compliance with KYC and anti-fraud measures.
- Maintain thorough records of guarantor applications, checks, and agreements as evidence of due diligence.
- Keep abreast of regulatory changes affecting tenancy deposits, rent collection, and guarantor use.
- Engage with letting agents to update application processes and tenant vetting practices in line with the Act.
Supporting landlords through regulatory changes with TLA
The Landlord Association (TLA) offers members access to detailed compliance resources and practical guidance on adapting to the Renters Rights Act. Through TLA’s BETA testing of ORBIT, a new property management and compliance platform, landlords and letting agents can organise tenancy documents, record guarantor details, and monitor regulatory developments in one place. ORBIT’s tools help track key actions such as rent guarantor checks and communications, supporting landlords in maintaining evidence of compliance.
Exploring TLA membership provides landlords with ongoing updates on tenancy law changes and access to expert compliance support. This can be especially valuable as the sector adjusts to the evolving requirements introduced by the Renters Rights Act.
Landlords should consider reviewing their current tenancy procedures and using available TLA resources to prepare for further regulatory developments.
Looking ahead, the role of rent guarantors is likely to remain significant in the private rented sector. Landlords who integrate guarantor arrangements thoughtfully and maintain robust compliance practices will be better positioned to manage tenancy risks effectively.
Sources: Landlord Today
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