Is a Co-Signer Agreement Legally Binding to Monies Owed
April 15th, 2014 by Dodie
Owning rental properties is a great way to make money, and you can do this full-time or part-time. If you manage the units successfully, you stand to make a lot of money, but there are several common ways things that may cause you to lose money. One of these occurs when tenants fail to pay their rent.
How to Select Good Tenants
Choosing good tenants is difficult, but it is vital if you want to make money. You can take several steps to ensure that you select the right tenants, and these are some of them:
- Run background checks
- Perform credit checks
- Require security deposits
- Require co-signers
There are times when applicants have bad credit or no credit. Renting a unit to a person like this is risky, but there is one thing you can do to protect yourself. If you decide to lease a unit to a person who has bad or no credit, require a co-signer.
What is a Co-Signer?
A co-signer is a person that signs a lease with another person. This person signs the lease as a co-signer, and the co-signer takes on the obligations of the lease. This primarily includes the financial obligations stated in the lease. Co-signers do not dwell in the rental properties. They are simply taking on the role of paying the rent if the applicant fails to do so.
If you decide to let a person co-sign for a tenant, you must have this person sign an agreement. You should also perform a background check and credit check on this person. If the background check comes back with negative information, you have the right to turn this person down. On the other hand, if the co-signer has perfect credit, you may want to approve the application – as long as the co-signer signs it. Once this happens, the co-signer becomes just as responsible for the lease as the tenant.
What does This Mean?
What this means to you as the landlord is that if the tenant does not pay his or her rent, you can go after the co-signer. The agreement the co-signer signed IS legally binding. While the co-signer may fight you on this, you can always take him or her to court. If you can produce the signed agreement to the court, the court is likely to rule that he or she must pay. You can go after all past-due rent owed to you, but that is not all. If the tenant moves out before the expiration date of the lease, you can also go after the rent for any of the remaining months of the lease agreement.
Running a property management company of any kind is challenging, but you stand to make more money if you perform the necessary steps prior to renting out apartments. Protecting yourself is always vital in this business, and this is one good way to handle this.
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