Whenever a tenant signs a lease, there is also some risk that the tenant will not be able to consistently pay rent for the term of the lease. When that risk is heighten a landlord, or property manager may consider approving the tenant for the lease if they have a cosigner. A cosigner is a third party that is also responsible if a tenant is not able to pay rent. Landlords may want a cosigner for a lease if it is a young tenant without an established credit history or if the tenant does not make the required minimum amount of money to rent the apartment. However, simply adding a cosigner to the lease does not mitigate all risks and therefore a thoughtful cosigner policy should be established if a landlord or property manager is considering allowing cosigners.
According to Allbuinsess.com, there are several aspects a landlord should consider when creating a cosigner policy or deciding what type of cosigner to accept.
It is important to check the finances of the cosigner to ensure that they will be able to pay the rent if the tenant cannot.
Have a contact procedure in place to be able to reach the cosigner in the event the tenant does not pay the rent.
Make sure the cosigner understands what his obligations are when he decides to become a cosigner, including the terms of the lease.
Landlords will need to decide if they will allow more than one cosigner per lease. Having multiple cosigners splits the risk and financial liability among more people but also means the landlord would have to get payment from more than one person in the case that the tenant does not pay.
Decide how long the cosigner will be liable to pay any missed rent. For example, some landlords may only require a cosigner for the first six months.
Allowing cosigners can have several positive benefits including opening your rental to a larger market of tenants and mitigating if a tenant fails to pay. However, there can be drawbacks including having to chase after both tenant and cosigner if rent is not paid. Therefore, it is very important for landlords and property managers to carefully consider whether allowing cosigners is worth it based on their rental market.
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.