Understanding Guarantor Responsibilities
Involving Parents or Other Persons As Co-Signers Upon Lease Agreements
Page last modified: January 05 2022
Can a Landlord Require a Guarantor on a Lease?
It is Legal for a Landlord to Require a Co-Signer On a Lease. However, Co-Signer Clauses Are Enforceable Only If the Lease Is Properly Written and Pursued In the Proper Venue.
Commonly found in a Residential Tenancy Agreement is a guarantee clause, where a person—typically the parent or parents of a young tenant—assumes the role of the guarantor.
Two frequent scenarios where landlords encounter difficulties in securing the expected assurance from a guarantor arise when:
- The landlord attempts to bring a claim in the Small Claims Court as against the guarantor without first obtaining an Order as against the tenant from the Landlord Tenant Board; and
- The landlord fails to properly draft the lease so as to adequately define the guarantee obligations of the guarantor
In the context of principles concerning guarantors, a fundamental notion of a guarantee is that the person serving as a guarantor becomes liable on behalf of the individual for whom the guarantee is provided, but only if the individual for whom the guarantee is given is initially liable. The guarantor’s liability exists alongside that of the primary debtor, and without any liability on the part of the primary debtor, the guarantor is not held accountable, as established in Stamm Investments Limited v. Ryan, 2015 CanLII 52577, paragraph 21.
To illustrate with a tenancy example, if Sally leases an apartment from ABC Properties Inc., and ABC Properties Inc. secures a ‘guarantee’ from Sally’s parents, the parents become ‘guarantors’ obligated to pay on behalf of Sally if she becomes liable. However, the crucial condition is that Sally must first be deemed liable. In this scenario, ABC Properties Inc., as the landlord, must initially pursue liability against Sally and obtain an Order from the Landlord Tenant Board, if the matter falls under the jurisdiction of the Board. If ABC Properties Inc. neglects this step in pursuing liability against Sally in the appropriate forum, any subsequent attempt to seek payment from Sally’s parents should be unsuccessful. In essence, the guarantors, Sally’s parents, cannot be obligated to pay for a liability on behalf of Sally that either does not exist or is not yet established.
Another potential challenge for a landlord arises when the obligations within the guarantee provided by the guarantors are not adequately defined. If a landlord fails to clearly outline these obligations, enforcing the guarantee against the guarantor becomes impossible, as seen in Times Square v. Shimizu, 2001 BCCA 448.
[26] The plaintiff landlord prepared the document. It failed to include language which spelled out the obligation to be assumed by the guarantor. I cannot accept that in the absence of any such language it should be implied that the obligation consists of guaranteeing all the obligations of the tenant. In the final analysis, although Mr. Shimizu, senior, indicated a readiness to assist in the leasehold arrangements by acting as a guarantor, the landlord did not actuate that intention by settling the applicable terms.
[55] Glenn Evangelista signed the rental agreement as guarantor but did not sign any further guaranty as contemplated by the guaranty clause in the rental agreement. In any event Glenn did not guaranty any future extensions of the lease, nor to the statutory month-to-month tenancy in 2014. He is not liable for the special damages awarded.
Subject to subsection (2), upon the expiration of a tenancy agreement for a fixed term, the landlord and the tenant shall be deemed to have renewed the tenancy agreement as a monthly tenancy agreement upon the same terms and conditions as are provided for in the expired tenancy agreement.
[3] The legislation does not purport to affect or apply to guarantors. The guarantor in this case is not deemed to have done anything. There was no language in the guarantee itself dealing with renewals. In those circumstances it seems to us that the guarantee expired at the end of the first year.
Accordingly, where a one year lease period expires, and the tenant remains within the unit so to continue as a monthly tenancy as provided by the security of tenure provisions within the Residential Tenancies Act, 2006, S.O. 2006, Chapter 17, section 37, the obligations of the guarantor, unless expressly stated within the original lease, or other applicable contract, cease. The law avoids presuming that the guarantor is endlessly obligated.
The Jurisdiction For Proceedings Against a Guarantor Differs From the Jurisdiction For Proceedings Against a Tenant
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