Rental guarantee: what are the main ones and how they work?

Closing a rental agreement requires some conditions and care to avoid problems for both parties. The tenant must commit to comply with the tenant’s rules in addition to ensuring that the rent is always up to date. The most well-known rental guarantee is the one that requires a guarantor, however, this is not the only option. Faced with the difficulties of finding someone who is committed to being your guarantor, the real estate market offers other options for rent guarantee.

Rental guarantee: how does it work?

Renting a property is a financial transaction that involves risks for both parties involved and requires a lot of attention. Accordingly, the Tenancy Law allows guarantees to be required in this agreement. In short, rental guarantees serve to safeguard the rights of the landlord and tenant. There are several options for guaranteeing the parties’ duties and rights:

Capitalization bond

The capitalization bond can be an alternative for those who rent a property. This is a specific version of the traditional title model, where the tenant attaches it to the lease. The value can vary from 8 to 10 times the rental price and the great advantage of this rental guarantee is that the capitalization bond has no costs for the tenant, such as surety bonds. This happens, because the entire amount applied goes back to him at the end of the contract.

Basically, at the end of the contract, if the accounts are up to date and the property is returned within the contractual conditions, the tenant redeems the title with the necessary corrections. If there are debts or losses, the amount can be withdrawn by the owner of the property. The disadvantage of this rental guarantee is its high cost. Typically, homeowners require a high security bond amount, equivalent to six months’ rent or more, to accept the security bond.

Another advantage of this modality is that it does not require proof of income, and even if the tenant has restrictions on credit protection services, it can still be adopted, unlike surety bonds. The hiring takes place in a simple way, requiring only an insurance broker who will issue the proposal and as soon as the ticket is paid, the title is linked to the rental contract.

Bail insurance

After the guarantor, this is the most guaranteed rental guarantee in rental contracts in Brazil. The service is contracted by the lessee, through an insurance company that issues the surety bond. The insurer becomes responsible for the fulfillment of the guarantee, that is, if the tenant does not honor the debts, it makes the payment, in addition to also being responsible for any eviction actions.

For tenants, this is usually the most viable option, as it allows for the installment payment of the amount. The prices of this guarantee usually vary between 8% and 15% of the monthly rent. It is renewed annually and there is no refund of the amount at the end of the lease.

Security deposit

This type of rental guarantee is as well-known as the guarantor. It is an agreement between the tenant and the landlord, where an amount is agreed and will be deposited as a guarantee in case of default. The deposit is usually made in a savings account and is equivalent to 3 or even 10 rentals. If at the end of the lease there is no pending, the tenant can receive the money back, with interest and corrections. The obstacle of this model is precisely to obtain the necessary amount for this deposit.

Letter of guarantee

The letter of guarantee is a rental guarantee offered by banks or specialized institutions. Generally, the amounts can be paid in installments and depend on the rental price. Unlike surety bonds, it has a fixed maximum indemnity limit. Thus, the owner of the property may end up having losses if the amount of the debt is higher than the ceiling pre-established by the bank.

Credit card

The credit card is the simplest rental guarantee that best suits both parties when there is no guarantor. For this, you only need a credit card with a limit equivalent to 4 times the rental amount. In addition, for the first analysis the card is not analyzed, only the CPF of the tenant.

Guarantor

This is the most well-known rental guarantee for real estate. The guarantor is the person responsible for the payment of the rent, that is, it is he who is responsible for the payment of the debts and eventual charges of the lease, in case of default by the tenants. Generally, he is the owner of a property already paid and needs to prove income, in addition to not having credit restrictions in his name.

Guarantor: all about this guarantee

The guarantor is the person or asset used as a rental guarantee in cases of default by the tenant. In this way, he becomes responsible for the debts, providing contractual security to the lessor. The guarantee, then, becomes an obligation of third parties, who are responsible for the property, demanding that there be a bond of trust between the guarantor and the tenant.

What is the guarantor’s role?

As the most used and simplest rental guarantee, the guarantor does not need to have any family ties with the tenant. However, there must be trust between the parties, as this is an important contract. He will also sign the lease with the tenant and is responsible for taking on the property’s debts if the tenant is unable to afford the expenses.

Therefore, being a guarantor involves legal and financial risks and that is why many people may end up shirking that responsibility. This is because the person who assumes this responsibility runs the risk of losing the property he used as collateral, since it can be pledged to settle debts. There are two types of guarantors for this:

  • Subsidiary responsible guarantor: the guarantor is only called in and responds for the debt after the tenant has his property foreclosed. In other words, your responsibility only comes in the last case.
  • Solidary responsible guarantor: in this case, the tenant may be called upon at any time, including having his property pledged in order for the debt to be settled.

What it takes to be a guarantor

In addition to being a trustworthy person of the tenant, willing to assume the risks of the contracts, it is important that the guarantor meets some requirements:

  • Have a monthly income three times higher than the desired rental amount:  this is a way to ensure that the guarantor will be able to afford the rent and fees in the event of a tenant’s default. For this, it is necessary that the guarantor proves his earnings monthly to the owner or real estate agent.
  • Owning your own property as collateral: as we speak of a legal commitment, it is required that the guarantor has at least one own property paid off. This is a way of guaranteeing the guarantee, since, if there is no payment of the rent, this asset can be pledged. In order to prove the patrimony suitability, the guarantor must present a proof of residence in his name and a copy of the updated registration of the property. This is a way of guaranteeing the veracity of the contract.
  • Have availability for bureaucratic actions: it is essential that the guarantor is aware of his obligations, so that he does not breach them throughout the contract. Thus, the ideal and recommended is that they make a detailed analysis of the contractual clauses, in addition to solving all possible doubts, especially in relation to taxes.

 

In addition, the guarantor cannot have his name registered in credit protection systems, not have a tenant, nor be a guarantor of another property. Given these restrictions, it is sometimes difficult to find those who meet these requirements. Therefore, it is important to know the other types of rental guarantee.

Guarantor as a legal entity

Although it is not very usual and most people do not know this option, a company can guarantee a person in a lease agreement. For this, there are specific rules and documents that the person in charge of the legal entity must present in order to be responsible for the lease. In addition, the company’s social contract must provide for the possibility of being a guarantor under a lease.

The role of real estate in rental guarantees

Knowing the rental guarantees is very important before signing a lease. Given all the possibilities, having the support of a trusted real estate company is essential. It works as a rental intermediary, which is very important since these guarantees do not immunize the parties from possible fraud and scams.

Real estate companies like Casa Mineira Imóveis have years of experience and are a reference in business in your region. In this way, it is possible to analyze the credit history and profile of possible tenants, taking care from the inspection to the return of the property.