What is a Lease Guarantee?

A lease guarantee is a type of legal contract. It is used to help ensure that a party who grants a lease will receive the lease payments that are due in a timely manner. Essentially, this type of situation creates a cosigner arrangement in which a person agrees to pay the money that is owed in the event that the person who signed the lease defaults. A party, called the guarantor, who agrees to sign a lease guarantee document guarantees payment for another party.

Often, when a person has property, equipment, or assets to offer for leasing, he seeks applicants who have good credit and leasing histories. A lessor, who is a person who grants a lease, may give preference to these individuals because they are seen as less risky. Lessors want to be paid on time and those with good credit histories seem to be the most likely to follow through in this manner. In some cases, however, a lessor may decide to give a lessee, the person who leases the property, a chance despite the fact that he lacks good credit or an established leasing history. He may allow the person to sign the lease if he can get a guarantor with good credit to sign a lease guarantee on his behalf.

The guarantor in a lease guarantee situation takes on a good deal of risk in signing a lease guarantee form. Often, people do this because they fully believe the people they are helping will make timely payments. Unfortunately, this doesn't always happen, and the person in question may default on the agreement. This leaves the guarantor to take over the payments, despite the fact that he usually receives none of the benefit from the leased property or equipment. If the guarantor cannot make the payments or refuses to do so, the lessor may sue him and the lessee in court; this could also cause the guarantor's credit score to suffer.

Often, people turn to close friends and family members to help them when they need a lease guarantee. For example, a person may ask his parents to be guarantors for his first apartment lease. Likewise, a person may ask his friend to be his guarantor for equipment he needs to lease to start a business. In some cases, however, a business may act as a guarantor. For example, it may guarantee payment of leases on behalf of foreign companies that are good risks.