It is not uncommon that a rental applicant does not meet the landlord's criteria for acceptance. When that occurs should the landlord issue a denial or ask if the applicant has anyone willing to serve as a co-signer?
Many landlords do not want to ask about a cosigner, or even consider an applicant who has a co-signer. Landlords perceive the presence of a co-signer as weakness on the part of the tenant to qualify on their own.
A co-signer's willingness to share responsibility for the lease occupant may be exactly what is needed to lease your property. Using a co-signer will open up new opportunities by making your rental available to more potential tenants. Before a landlord dismisses the option of a co-signor, lets review the reasons why accepting one could make for a very smart business decision.
A co-signer will not actually live in the property but will become an equal obligor with the tenant on the lease. In doing so they are accepting responsibility for making rent payments. They are often needed when a tenant has limited rental history, inconsistent income, or no credit history.
So, how does a landlord make a rental decision that involves a co-signer? In our practice, the co-signor must fully meet all of our normal screening requirements. We do not pursue co-signers that provide partial income coverage to assist the occupant tenant. A co-signor is somebody who, by themselves, would be approved to live in the rental.
This means a co-signer will pay the same application fee and complete the same screening as the occupying tenant. In addition to the objective screening factors, it helps to see stability for the co-signer in employment or their living situation. Why? Because if the occupying tenant stops paying rent or even just vacates the property, the landlord will be able to locate a party to the lease. Locating a party to the lease allows the opportunity for the co-signer to agree to make the landlord whole, or served with legal summons if necessary.
Co-signers should have a close relationship with the occupying tenant. They will usually be a parent, family member, or somebody with a long-time close association with the occupying tenant. These types of co-signers have a clear motivation to assist the occupying tenant.
Anybody else that offers to co-sign should be addressed. What is their motivation to assist the applicant?
The best way to make certain the co-signer understands their obligation is to have them sign the lease or an addendum to the lease. In this document be clear that they are a joint obligor on the lease. Assuming your lease has joint and several liability language, this will signal to the co-signer that they are fully obligated for the lease term and all of its requirements.
While a co-signer will create more opportunities for rentals, and likely a better party to pursue in case of non-payment, it does not eliminate the normal risk of leasing property. It should though lower risk and make collection in the case of default, or damages, more likely.
WILMOTH Group is headquartered in Indianapolis and Fort Myers, Fla. WILMOTH Group focuses on providing creative local solutions for a variety of residential real estate needs including, properties for sale, property management services in Indianapolis, and short-term management services in Tampa and Fort Myers.
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