There are certainly pros and cons of allowing a co-signer on a lease. For most landlords and property rental companies, it’s a choice that comes down to weighing risks and rewards. Whether you decide to allow co-signers or not, it’s important to fully understand the implications of your choice. For many property rental companies, allowing co-signers is worth it for the simple reason that it helps fill vacancies. But for others, it’s just too much of a risk.
What Property Rental Companies Need to Know about Co-Signers
What does a co-signer do?
A co-signer is a person who signs the lease agreement along with the lessee or tenant. In doing so, they agree to be financially responsible for paying rent if the tenant fails to pay. You can think of a co-signer as an insurance policy or back-up plan, so you know the rent will be paid even if the tenant fails to pay.
Many rental management companies insist on a co-signer if a tenant doesn’t have the necessary credit score or meet the income requirements needed to rent an apartment. If you choose to allow a tenant to sign a lease with a co-signer, make sure both parties fully understand that they are each singly and jointly responsible for upholding the terms of the lease.
What doesn’t a co-signer do?
A co-signer can’t protect you from the behavior of a bad tenant. While a co-signer is financially liable for damages a tenant may cause to your property, they’re not liable for things like noise complaints and conflicts with other tenants.
Most importantly, a co-signer does not eliminate the need to screen your tenants. Property rental companies should always perform a thorough background check on all prospective tenants, regardless of whether or not they have someone to co-sign the lease with them.
What are the advantages of allowing a co-signer?
Allowing co-signers widens your pool of potential renters, and can help you fill vacancies in a tight market. And of course, it gives you peace of mind that there’s a back-up in place in the event that a tenant fails to pay rent. Situations in which allowing co-signers is especially advantageous include:
- When you’re in direct competition with other nearby rental properties.
- When you own rental property in a college town and want to rent to students.
- When you have multiple vacancies and need to fill them quickly.
Are there any disadvantages?
It is possible for landlords to get duped into allowing problem tenants into their property just because they have a co-signer. Remember to thoroughly screen not only each prospective tenant, but also their proposed co-signer(s).
It is conceivable to end up with a co-signer who is just as unwilling to pay the rent as the tenant they co-signed with. While you have every legal right to insist on payment from a co-signer if the lessee fails to pay, doing so can often be time-consuming and exhausting.
Should you allow a co-signer on a lease?
At the end of the day, it comes down to whether the advantages outweigh the potential risks of allowing co-signers in your specific situation. Many property rental companies choose to allow co-signer, and some don’t.
If you’re still uncertain about the best course of action for your rental property, contact us today to learn more about adding co-signers to a lease. We would also love to talk with you about how working with property management professionals can add an extra layer of security and peace of mind to the rent collection process.