What is a Co-Signer?
What is a co-signer for an apartment rental lease?
A co-signer or guarantor is another person who also takes full responsibility to pay the monthly rent for a residential rental lease, if the lessee is unable to do so. This provides landlords or property managers with the ability to contact another party and request payment for late rent. A co-signer must step in and pay the balance of the missing or late rent in order to not have their own credit score potentially harmed.
Who needs a co-signer?
Usually students or applicants with poor credit, lack of credit or little rental history are asked to produce a co-signer. Co-signers are also utilized when an applicant doesn’t have sufficient income to cover the proposed rent price. Some landlords will still request a co-signer if the applicant doesn’t have a sufficient length of work history. Landlords look for co-signers or guarantors whose income is verified and has good/excellent payment history and credit. Landlords usually use a debt to income ratio, most common used is between 30-40% pre-tax, but can be different in every case.
It’s important to understand the landlords or property managers policies so that you work in a diligent manner to complete the apartment rental process. Some landlords require all co-signers be submitted in the apartment rental process within one week otherwise they will not take the property off the market and continue to look for other applicants. In a highly competitive apartment rental market such as Boston, it is a prudent decision to figure out your co-signer options in advance of your apartment hunt.
Who should you ask to co-sign?
Often a co-signer will be a family member or close friend. The co-signer is obligated to pay any missed payments and even the full amount of the lease if the lessee defaults, including any damages that were done to the premises. The co-signer’s credit can also be affected if the lessee is late making payments. It is important to note, in the state of Massachusetts, late fees, including interest on late rent may not be charged until the rent is 30 days late. Boston has a massive student population and co-signers are a normal course of business in renting apartments throughout the area. Nearly all property owners in Boston are well aware of the co-signing process so it is not something that is startling or unusual to them.
Becoming a co-signer
Becoming a co-signer on any lease is a commitment that is legally binding. Landlords usually, if not always run credit checks (and potentially background checks) on co-signers. Discuss every scenario with the lessee that you are co-signing for to make sure everyone has set expectations. Usually the co-signer will only be contacted in the event that the lessee has not paid or is late with rent. Have a contingency plan if that does happen ahead of time. Co-signers are asked to get notarized paperwork to prove they are indeed real and have agreed to the terms and conditions set forth under the provisions of the lease. There are now different forms of notarization in both physical and electronic signatures and this area is evolving on a continual basis.
When does a co-signer’s obligation end?
The fiduciary obligation to cover the rent follows in lock step with the length of the lease. Over 90% of apartment leases in Boston are one year fixed term leases. Usually if a tenant continues to stay longer than a period of a couple of years some financial situations can change for both the co-signer and the tenant. Perhaps the student graduates and gets a full time job and now has the income to handle the rent themselves and the co-signer can be removed. Or perhaps the co-signer loses their job so they no longer can be the fiduciary cover person. Landlords sometimes check in on these factors over the course of several years and may ask for a new co-signer but it is generally not a widely observed event due to the high turnover rate of apartments in Boston.