Guarantor or Surety for Leasehold Premises
A guarantor or surety for a lease takes on the responsibility of paying the landlord directly for any losses suffered as a result of the tenant being unable to pay rent or otherwise breaching the tenancy agreement. In other words the guarantor or surety act as the landlord’s insurance policy against any default.
Alternatively, landlords may accept cash deposits as security, however, to ensure this is used appropriately, there should be a detailed written agreement covering issues such as the amount of the deposit, what happens if the lease is varied, who holds the deposit and how and when it should be used to pay the landlord or returned.
In the event that the lease is disclaimed by a liquidator or trustee in bankruptcy the tenant has no further obligation under the lease. A guarantor or surety, however, will remain liable to the landlord notwithstanding the disclaimer unless the landlord re-takes possession of the premises. Following disclaimer, the guarantor or surety will lose their right of indemnity from the tenant.