If you’re want to rent in New York City and your income doesn’t meet a landlord's steep income requirement—which is typically an annual salary of 40 times the monthly rent—you may have no choice but to get a guarantor. However it’s important to know exactly what that means for you as the renter.
Using a guarantor may mean you ask a parent or other close relative to promise to pay the rent if you don't. An alternative is to use an institutional guarantor, or a company that you pay to step into this role. You need to be aware that using a guarantor can add to your monthly expenses, potentially strain your relationship with the relative, or take away some of the leverage you have as a renter.
You can lose an important tenant’s right
However, if the landlord does not hold up their end of the deal—and conditions in the apartment deteriorate or there are other violations—one avenue available to tenants is to withhold rent. This gives a tenant some advantage in situations where urgent repairs are needed, or the building doesn't have the right certificate of occupancy, or you are a rent-stabilized tenant who has been overcharged.
Jennifer Rozen, a tenant attorney at the Rozen Law Group, says it becomes a challenge for a renter to exercise their right to withhold rent when they have an institutional guarantor on the lease. "They have to fight the guaranty company and convince them not to pay rent to the landlord," she says.
Your monthly costs may increase
Unlike renters who turn to a family member to be their guarantor, there's a financial cost for renters who use an institutional guarantor—some companies charge a fee upfront, others use a monthly payment plan. The cost of using an institutional guarantor is usually between 65 and 85 percent of one month's rent.
"You’re being asked to put up an additional security deposit but it’s really not a security deposit, it’s a premium which is the cost of having the insurer cover that potential liability," says attorney Steven Kirkpatrick, a partner with Romer Debbas.
To rent an apartment in New York City, most landlords require you to earn an annual salary of at least 40 to 45 times the monthly rent. If you don't—or if you’re an international employed person, self-employed, non-employed with assets, retired, or an international student or US student—you’ll need to find a guarantor for your lease who earns at least 80 times the monthly rent and lives in New York, New Jersey or Connecticut. Or you can turn to Insurent Lease Guaranty. Accepted at more than 4,700 buildings across the city representing over 475,000 apartments, Insurent Lease Guaranty is a quick and easy way to get the apartment you want. Click here to learn more.
Your relationship with your guarantor could be strained
A tricky relationship won't be an issue with an institutional guarantor but if a parent, relative, or friend steps into the role, it's important to keep them updated with any changes to the lease. In many cases, the landlord doesn't have to tell the guarantor if the rent is late or the lease is renewed or extended. That means if you don't pay your rent, your guarantor might find out about it through a court filing. It's best not to put yourself in this situation.
Guarantors face major liability in this scenario. Kirkpatrick says he is working on a case where a tenant stopped paying rent two years ago. "The process is ongoing and if it goes to trial it could be two or three years without the landlord collecting a penny," he says. As a result, the guarantor "could be on the hook for five-plus years of rent," he says.
The only guarantee in that case is the end of the relationship.