Guarantor (co-signer)보증인, 개런터 (rent guarantor)

What is it?

A guarantor (often called a co-signer) is a person who promises to pay the landlord if the tenant does not pay the rent or breaks the lease and the landlord loses money. It is usually a parent, sibling, relative or close friend.

In Ontario a landlord is allowed to require "a guarantee for the rent". That is written in O. Reg. 290/98, s. 2 (1), under the Human Rights Code. Newcomers without Canadian credit or rental history, students, and young people in their first job are often asked for one.

A guarantor does not live in the unit. Under the Residential Tenancies Act (RTA), a "tenant" is a person who pays rent for the right to occupy the unit, so the guarantor is not a tenant but a separate person who made a promise.

How is it put in writing?

The 17 sections of the Ontario standard lease have no guarantor box. So the guarantee is usually a separate guarantee agreement, or a document attached under section 15, "Additional terms". Either way it must be in writing to avoid disputes later.

Things to check in the guarantee: what it covers (rent only, or damage and costs too), whether there is a dollar cap, how long it lasts (the first term only, or renewals too), whether the landlord must ask the tenant first, and which court handles disputes.

Have a lawyer read it before you sign. Once signed, it is hard to get out of, even if the tenant’s or landlord’s situation changes.

What the guarantor risks

• Paying the unpaid rent. If the tenant missed several months, that can be all of it.
• Depending on the wording, paying for damage to the unit and the landlord’s legal costs too. Check whether it says "rent only".
• Being sued. Because a guarantor is not a tenant, how Landlord and Tenant Board (LTB) procedures apply can differ case by case, so get advice from a lawyer or community legal clinic as soon as you receive a claim.
• A court judgment that is not paid can affect the guarantor’s credit record.
• The guarantee stays even if you fall out with the tenant. A guarantor has no right to remove the tenant or end the lease.

How long does it last?

No law sets the length. The wording of the guarantee does. Many guarantees say "for as long as the tenancy continues, including renewals", so the guarantee goes on after the first year ends.

In Ontario, when a fixed-term lease ends it automatically becomes a month-to-month tenancy on the same terms (RTA, s. 38 (1)). If the guarantee covers renewals, it can continue through that month-to-month period.

To limit it, ask before signing for wording such as "the first term only (for example, 12 months)" or "up to a maximum of $X". If you already signed, the only way out is the landlord’s written agreement to release you.

When a landlord may, and may not, require a guarantor

• May: when the same rule applies to every applicant, or when there is a real reason such as poor references, poor credit or a history of not paying rent. (OHRC policy)
• May not: only because the applicant is a newcomer, a lone parent, young, receiving social assistance, has a disability, or belongs to another group the Human Rights Code protects. That is discrimination.
• May not make the guarantor meet a rent-to-income ratio that could not be applied to the tenant. (OHRC policy)
• May not take a bigger deposit instead of a guarantor. The only deposits allowed are a last month’s rent deposit and a refundable key deposit (RTA, ss. 105 and 106; O. Reg. 516/06, s. 17).

Alternatives to a guarantor

• Proof of income and savings: an employment contract, pay stubs and a Canadian bank balance letter show you can pay the rent.
• References: letters from a landlord or employer abroad (translated into English) help. The OHRC says a lack of history must not count against you.
• Tenant insurance: under section 11 of the standard lease a landlord may require liability insurance. Having it eases the landlord’s worry about damage.
• Post-dated cheques or automatic payments cannot be required: a landlord may not require a tenant to provide post-dated cheques or allow automatic debits (RTA, s. 108). A tenant may still offer them voluntarily for convenience.
• A larger deposit cannot be required, and money paid voluntarily can be hard to get back, so ask a lawyer first.

Not the same as a mortgage co-signer

When you buy a home, a "co-signer" joins the mortgage contract and is responsible for the whole loan. A rent guarantor only guarantees money owed under a lease. Both are promises to pay, but the amounts, the length and the laws are different. See "Mortgage" for the mortgage side.

Example