When an applicant visits the management office on a property and says that he or she is interested in renting a unit, but can’t qualify on his/her own, managers often suggest having a cosigner or guarantor apply to help qualify. This is a great option for landlords because they have another person that they can pursue in the event that the resident fails to fulfill the contractual terms. However, many new managers may not realize that the terms “cosigner” and “guarantor” are not interchangeable and the distinctions are important.
The main reason people use the terms interchangeably is because both a cosigner and a guarantor are liable for all amounts due. Therefore, if a resident breaches the lease, the landlord can pursue a cosigner or guarantor for all the rent and all damages caused by the resident. The similarities stop there.
A cosigner is someone who actually signs the lease, while a guarantor is someone who signs a separate guaranty. Both parties are financially liable for the term of the lease, but the initial difference is, only one has a right to occupy the property. When a person signs the lease as a cosigner, unless the contract provides otherwise, they are actually a tenant and have the right to occupy the property and use the amenities. On the other hand, a guarantor never signs the lease and only signs a separate guaranty whereby they agree they are financially liable for all obligations of the lease.
This is important for several reasons. First, if you allow guarantors and not cosigners, then the additional person is not included in your occupancy standards for fair housing purposes. For example, a husband and wife with a child may move into a one-bedroom unit and qualify even if they use their parents as guarantors. The parents would not be counted for occupancy purposes and thus it gives the residents a lot more options for where they can live.
Second, if the guarantors are not signing the lease, they cannot be served at the property in an eviction. As landlords know, when they file an eviction, the process server serves the eviction to someone in the property personally or posts-and-mails the summons and complaint. In the case of a guarantor, they are not allowed to live in the property and thus cannot be served at the property. It is because of this that guarantors are not included in the eviction action. The guarantor is still contractually liable for the amount of the judgment, but the landlord would have to file a second lawsuit to collect the money from the guarantor. On the other hand, if a person is a cosigner and they actually sign the lease, they are deemed to live in the property and thus can be included in the eviction and served at the rental property. This results in a judgment against them which can be sent to collections. The hope is that when a cosigner is named in the eviction, they immediately respond and pay the rent that is due.
Whether a landlord uses the term cosigner or guarantor does not matter - what matters is what documents says, as that will control what rights the landlord has.
Mark B. Zinman is a partner with the law firm of Williams, Zinman & Parham P.C. and is a past and present board member of the AMA.