Guarantor Enforcement UK — How Landlords Enforce a Tenancy Guarantee

Types of Tenancy Guarantee — Unlimited, Limited, Joint and Several

Before enforcing a guarantee, landlords must understand the scope of the guarantee they hold — different guarantee types have significantly different coverage: (a) Unlimited guarantee: the guarantor is liable for all the tenant's obligations under the tenancy — unlimited rent arrears; all damage above the deposit; all breach of covenant liabilities; the full scope of the tenancy agreement; this is the most common and most favourable type of guarantee for a landlord; (b) Limited guarantee: the guarantor's liability is capped — either by a monetary limit (e.g. 'the guarantor's liability shall not exceed £5,000') or by time ('the guarantor's liability shall not exceed 12 months' rent') or by type of obligation ('the guarantor is liable for unpaid rent only, not dilapidations'); a limited guarantee must be carefully read to understand what it does and does not cover; (c) Joint and several liability: where there are multiple guarantors, joint and several liability means the landlord can pursue any one guarantor for the full amount (not just their proportionate share) — the guarantor who pays can then seek a contribution from the other guarantors; (d) On-demand guarantee: also called a demand guarantee or letter of credit — the landlord can make a demand for payment by the guarantor without first suing the tenant or establishing the tenant's default in court; rare in residential letting but more common in commercial contexts; (e) See-to-it guarantee (most common): the landlord must first establish the tenant's default before the guarantor is obliged to pay — the guarantee is 'co-extensive' with the tenant's obligation; the landlord does not need a court judgment against the tenant first but must be able to demonstrate the default. Corporate guarantors: where the guarantor is a company (rather than an individual), the guarantee must be executed as a deed signed by two directors or a director and company secretary (Companies Act 2006 s.44) to be a valid deed; SDLT may apply to the guarantee if there is a premium element. Scotland: guarantee law in Scotland follows different principles from English contract law; the rule of 'benefit of discussion' in Scotland means the creditor may need to pursue the principal debtor first before claiming against the cautioner (guarantor) — unless the guarantee expressly excludes benefit of discussion.

• Unlimited guarantee: guarantor liable for all the tenant's obligations without cap — the most favourable for landlords; includes all rent arrears; dilapidations; breach of covenant
• Limited guarantee: liability capped by amount, time, or type of obligation — read carefully before making a claim to confirm the guarantee covers the specific loss you are claiming
• Joint and several: where multiple guarantors, the landlord can claim the full amount from any one guarantor — that guarantor can then seek a contribution from the others
• See-to-it guarantee: landlord must demonstrate the tenant's default before the guarantor's obligation is triggered — no court judgment against the tenant required, but evidence of default is needed
• Scotland — benefit of discussion: Scottish cautionary obligations (guarantees) may require the creditor to pursue the principal debtor first unless the guarantee expressly excludes this rule; take specialist Scottish law advice

Triggering the Guarantee — Notice Requirements and Demand

The procedure for triggering a guarantee depends entirely on the wording of the guarantee document. Most residential tenancy guarantee agreements are loosely worded and do not specify a formal notice procedure — in these cases, the landlord simply needs to write to the guarantor confirming the amount of the default and demanding payment. However, some guarantee agreements — particularly those drafted for commercial or HMO letting — specify formal notice requirements: (a) Written demand: many guarantees require a formal written demand to be served on the guarantor; the demand should: identify the tenancy; identify the defaulting tenant; specify the amount of the default (rent arrears; dilapidations; unpaid charges); state the period of arrears; specify the date by which payment is required; (b) Method of service: serve the demand in accordance with the notice provisions in the guarantee agreement (or the tenancy agreement if the guarantee is incorporated within it); typical methods — first-class post to the guarantor's address for service; hand delivery; email (only if the guarantee expressly provides for email service); (c) Period for payment: many guarantees require the landlord to allow a reasonable period for payment after the demand before taking legal action; 14 days is typical; (d) No need to exhaust remedies against tenant first: for a standard 'see-to-it' guarantee, the landlord does not need to obtain a court judgment against the tenant, exhaust the deposit, or take possession proceedings before claiming against the guarantor — but the landlord should have documented evidence of the tenant's default (rental account; schedule of dilapidations; notices previously served). Common mistakes that invalidate a guarantee claim: (i) serving demand on the wrong address (always check the guarantee agreement for the guarantor's address for service); (ii) failing to follow the notice procedure specified in the guarantee document; (iii) claiming an amount that exceeds the cap in a limited guarantee; (iv) claiming for a type of obligation not covered by the guarantee; (v) allowing the limitation period to expire before issuing court proceedings.

• Written demand: serve a clear written demand on the guarantor identifying the tenant; the tenancy; the amount of the default (rent arrears or dilapidations); the period; and the payment deadline
• Method of service: follow the notice provisions in the guarantee or tenancy agreement — typically first-class post to the guarantor's address for service; email only if expressly permitted
• No need for prior court judgment: for a standard 'see-to-it' guarantee, the landlord does not need a CCJ against the tenant before claiming from the guarantor — but documented evidence of default is required
• Do not delay: issue court proceedings promptly if the guarantor does not pay within the demand period; the limitation period runs from the date of the tenant's default (or the date the guarantee demand was made, depending on wording)
• Avoiding invalid claims: always re-read the guarantee document before serving a demand to confirm the amount is within the cap; the obligation type is covered; and the notice procedure is correctly followed

Limitation Periods — How Long Landlords Have to Claim

The limitation period for a guarantee claim depends on whether the guarantee was given by deed or by simple contract: Guarantee by deed: a guarantee executed as a deed (signed, witnessed, and delivered as a deed) has a 12-year limitation period under the Limitation Act 1980 s.8. This is the most common form for tenancy guarantees that are incorporated within or attached to a tenancy agreement executed as a deed. Guarantee by simple contract (not by deed): a guarantee not made by deed has a 6-year limitation period under the Limitation Act 1980 s.5, running from the date the cause of action accrued (the date the tenant first defaulted on the obligation guaranteed). The cause of action against a guarantor typically accrues when: (a) for rent arrears — when each instalment of rent falls due unpaid; (b) for dilapidations — when the tenancy ends and the landlord has suffered the loss (the end of the tenancy, not the date the damage was caused); (c) for a demand guarantee — when a valid demand has been made and the guarantor has failed to pay. Practical implications for landlords: a landlord who delays enforcing a guarantee risks losing part or all of the claim to limitation; where a tenancy has run for many years and arrears have accumulated, rent arrears from more than 6 years ago (or 12 years if the guarantee is a deed) may be outside the limitation period; monitor and act promptly. Guarantor insolvency: where a guarantor is individually bankrupt or a corporate guarantor enters administration or liquidation, a guarantee claim must be submitted as a proof of debt in the insolvency process; the claim should be submitted promptly (there is typically a bar on late proofs of debt in liquidation); the probability of recovery depends on the extent of the insolvency estate and the priority of the landlord's claim (unsecured creditor in most cases).

• 12-year limitation for guarantee by deed: where the guarantee is executed as a deed — the most common form in residential letting — the landlord has 12 years from the date the cause of action accrued
• 6-year limitation for simple contract guarantee: where the guarantee is not a deed — 6 years from the date the tenant defaulted; separate causes of action accrue for each unpaid rent instalment
• Rent arrears: cause of action accrues for each instalment when it falls due unpaid; earlier arrears become time-barred if not claimed within 6 or 12 years of the due date
• Dilapidations: cause of action typically accrues at the end of the tenancy when the landlord suffers the loss — not when the damage was caused
• Insolvency: where guarantor is bankrupt or in liquidation, submit a proof of debt promptly in the insolvency process; the claim is typically unsecured (low recovery rate in most insolvencies)

Enforcement Through the Courts — Small Claims, Fast Track, and AGA

If the guarantor does not pay following a valid demand, the landlord must issue county court proceedings to enforce the guarantee: Small claims track (up to £10,000): where the guarantee claim is for £10,000 or less, the claim is usually allocated to the small claims track — the hearing is informal; costs recovery is very limited (usually only the court fee and fixed costs); solicitor representation is not usually required but is helpful for complex guarantee cases; Fast track (£10,000–£25,000): guarantee claims between £10,000 and £25,000 are allocated to the fast track; a hearing is listed within 30 weeks of allocation; costs are recoverable on the standard basis if the landlord is successful; Multi-track (above £25,000): larger guarantee claims are allocated to the multi-track; more complex procedure; full costs recovery for the successful party. County Court Judgment (CCJ): if the landlord obtains a CCJ against the guarantor, enforcement options include: attachment of earnings (where the guarantor is employed); charging order on the guarantor's property (where the guarantor is a homeowner); third-party debt order (garnishee — where the guarantor is owed money by a third party); taking control of goods (county court bailiff or HCEO). Commercial letting — Authorised Guarantee Agreement (AGA): in commercial letting, an AGA is a specific type of guarantee under the Landlord and Tenant (Covenants) Act 1995 s.16 by which an outgoing tenant guarantees the performance of their immediate assignee. The landlord has a right to an AGA where the lease includes a restriction on assignment or where the landlord consents to assignment on the condition that an AGA is provided. LTCA 1995 s.17: the landlord must serve a notice on a former tenant (and guarantor of a former tenant) within 6 months of a fixed charge (rent, service charge) falling due — failure to serve the s.17 notice within 6 months extinguishes the claim against the former tenant or guarantor for that charge. This is a critical procedural trap for commercial landlords.

• County court proceedings: issue a claim in the county court if the guarantor does not pay following a valid demand; small claims track for up to £10,000 (limited costs recovery); fast track £10,001–£25,000; multi-track above £25,000
• CCJ enforcement options: attachment of earnings; charging order on guarantor's property; third-party debt order; taking control of goods (county court bailiff or HCEO); bankruptcy petition (for individual guarantors owing more than £5,000)
• AGA (commercial letting): an authorised guarantee agreement (LT(C)A 1995 s.16) allows a landlord to require an outgoing commercial tenant to guarantee their immediate assignee's performance; AGA liability is extinguished when the assignee assigns again
• LT(C)A 1995 s.17 notice (commercial): where rent or service charge is owed by a former tenant or AGA guarantor, the landlord must serve a s.17 notice within 6 months of the charge falling due — failure to do so extinguishes the claim for that charge
• Insolvent guarantors: an individual guarantor who cannot pay can be pursued by statutory demand (21 days) followed by a bankruptcy petition; a corporate guarantor can be pursued by winding-up petition if the debt is undisputed and exceeds £750 (from April 2024 increased to £10,000 following temporary COVID measures reverting)

Frequently asked questions