Cosigning or guaranteeing loans out of love can lead to disappointment and financial problems for the guarantor. My kind-hearted husband cosigned multiple student loans for one of my stepdaughters. She did not service the loans, which escalated. She would not even cooperate with his request to take out life insurance (which he would have paid for) so that in the event of something happening to her, he would not be left with huge debt in his retirement. Eventually he felt it necessary to pay off all the loans, rather than have them hanging over him. What a clever girl!!
@Cassandra
Ugh. Clever is not the word I would use.
It would be worth paying a lawyer to straighten this out.
6
@ Drew
Hiring a lawyer to "persuade" your friend to provide you with a copy of the current lease might work, and then you'd know whether you should contact the landlord to give notice that you won't guarantee the next renewal. You might still be on the hook for the rest of the current lease, but hopefully that would end your liability for the future.
This is just never a good idea! The only person I exchange this level of money with is my beloved husband. For friends down on their luck I will make referrals to get real help, pay for dinner and drinks when we are out and lend a supportive ear but some boundaries are there for a reason.
10
POLONIUS:
"Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine ownself be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.
Farewell: my blessing season this in thee!"
Hamlet - ACT I; Scene iii
9
I co-signed on a one year apartment lease many years ago. The lease was renewed, and I didn't sign a new guarantor agreement or notify the manager I was not going to sign it. The manager never followed up on the guarantor agreement.
The tenant subsequently missed a rent payment. The management company called me first requesting payment. Lucky for me my obligation expired when the original lease expired.
When you co-sign on another's obligation, you become the debtor and then you hope that the person that originated the obligation pays as agreed in the contract.
7
The lesson here is that, if you must guarantee the lease of a friend or loved one, make sure you are only guaranteeing the current lease, and not subsequent renewals.
16
@Robert
I agree 100%.
5
One advantage you may have here is that the current owner of the property may not have all the historic paperwork. If the building changed hands several times in the past 20 years it is possible that the current owner does not have a copy of the original guarantor agreement. You might want to first research the building's owners over the past 20 years. If there is a series of transactions, you might be best off not alerting the current owners that you were once a guarantor on the lease.
28
Oh lord. This is malpractice on behalf of Kaysen. Leases are re-signed. There is no way the guarantor is still a party. His liability ended the very first time the lessor signed a new lease.
4
@Matthew. Keysan is correct. It depends on the guarantor agreement, many of which stipulate guaranteeing renewals, especially of rent-stabilized apts of up to 25yrs.
10
After 20 years, the landlord might benefit from a new tenant and higher rent. If default is likely, his position may not be so obvious.
5
I see little to be gained by going to the landlord. If the guarantee is still in effect the landlord has no incentive to release it. But 20 years is a long time and the landlord's records may not show the guarantee, particularly if the building has been sold or if it hired a new managing agent. In that case, the only result of contacting the landlord or managing agent may be to remind them that the guarantee exists and can be called upon in the event of default.
24
I would work on repairing the friendship.
5
This article quotes a lawyer, and I am not a lawyer. But are you REALLY allowed to go around spreading rumors to a landlord about about a tenant's finances? The LW apparently hasn't heard from his friend's landlord ever. This indicates to me that the friend has been a financially responsible tenant for decades. The LW says his friend hasn't worked in 18 months. OK. Suppose over the years he's been able to sock away 25 months' worth of expenses in savings? Suppose he's been holding onto some jewelry of his grandmother's that he could sell for $50K if he really needed to? Suppose the tenant is willing to dip into an IRA and suck up the penalties to keep his lease? The LW doesn't seem to be in a position to know any of this. So he may be going to a landlord to say a tenant isn't financially stable when in fact the tenant may be more stable ... having payment for months of expenses available ... than many people in this city.
15
@10034
That all may be true--and if it is, he no longer needs the support of his now-former friend as a guarantor, and he should release him from the obligation.
But if he has benefited from his former friend's financial back-stopping all these years, and now won't provide the documentation to enable the letter writer to be removed from an obligation he made a very long time ago (when the renter and writer were still friends, and the writer generously agreed to take on this financial risk on behalf of a (then) friend who needed help), then gloves off, I say.
It may seem unfair for the writer to say anything to the landlord about the renter's finances. But the renter's attempt to hold a now former friend to a guaranty of his lease made 20 years ago is also unfair.
I think Ms. Kaysen's final suggestion is a good one: give the renter one more chance to provide a copy of the lease. If he continues to refuse, he chooses to live with the consequences.
10
@10034
Kaysen addresses that by advising the letter writer to give the tenant one last chance to provide a copy of the lease before going to the landlord.
However, I agree with other commenters that the landlord may not even be aware of the guarantee after all these years. So it may be helpful to do some sleuthing and review the history of the ownership of the property before contacting the landlord.
6
I don't understand how you can still be held responsible as a guarantor 20 years later. It's 20 years!! Good grief, this is ridiculous.
8
@Jo
contracts are not limited in time. Nor should they be, think about how negatively that would affect your own life.
I'm afraid it's not the slightest bit ridiculous. Being a guarantor is a poor idea.
13
@charles
Contracts are time limited all the time! It's why we have them - to make you responsible for set things at set times. That's the whole point of having a term of a lease - you are not obligated forever unless that's what you sign. However, some contracts are poorly written or specify long time frames - in this case the guarantor won't know unless he has the original paperwork.
That's also the time to pay a lawyer - up front to renew the contact is far cheaper than later to sue or get out of a bad one.
2
A couple considerations:
Guarantors cannot be pursued as parties in housing court proceedings. Pursuant to relevant statutory law (specifically, RPAPL section 7), only parties in possession of the premises may be pursued, which means, in this instance, your erstwhile friend. To pursue the guarantor, the landlord would have to sue in a "plenary" action, the forum for which is in a different section of civil court. Cold comfort, but worth knowing nonetheless.
You may want to consider sending a letter to the landlord indicating in substance that while you are all but certain that the guaranty is no longer binding and enforceable, you are putting him on notice that to the extent she/he/it believes otherwise, you are putting the landlord on notice that you are revoking your consent as guarantor, effective immediately, and upon expiration of the current term. Your letter may not destroy your liability if in fact your guaranty is perpetual upon renewal, but still, it's better than nothing --- if the landlord doesn't know any better, it could get the job done.
20
@OWH The landlord would have to be a fool's fool to believe that you can revoke your guarantee at your pleasure. What would be the purpose of such a guarantee? If you are one attorney, I wonder if you are the type who says whatever is expedient to "get the job done."
When I was a kid, an aunt lent money to a dear friend of hers whose husband was ill. She never asked to be repaid, but their friendship was never the same.
When money changes hands, a relationship becomes lopsided. How could it not?
I'd be really hesitant about lending money to anyone. But then, I am not in a position to, anyway.
23
@B. No money changed hands in this case. Look up "guarantor." However, there was (and maybe still is) a financial risk to the writer, so it is an example of insufficient forethought.
6
I understand that. I know what a guarantor is, and I read the article.
I was musing upon the fact that when "money" (because the guarantor might very well end up on the hook) becomes an issue between friends, things change.
You know, I had a feeling someone who likes to be right even when there's no call for it would take issue with my comment.
23
@B. Yes you do like to be right.
4
I would have thought that every time a new lease was executed, the guarantor would have had to sign it too. Now, some rent controlled apartments can in effect be renewed without a lease, but typically a lease signed 20 years ago would not be rent controlled (it might be rent stabilized). I suspect that the reason the tenant will not provide a copy of the lease is because he forged his friend's signature. I would not offer ANY money to the former friend. I would be very careful with what I say to the landlord. Not certain I would contract the landlord, but I would say I guaranteed a lease 20 years ago, and not since then.
25
Can anyone address this? I'm not sure how one could be liable for future leases without signing the renewals.
8
Some leases have provisions that the guarantee is automatically continued on renewals. However, NY case law is that when lease has substantive changes, that clause will not be operative. It is difficult for me to accept that over 20 years, the lease has not changed substantively. Most residential landlords will demand the guarantor re-sign, they do not want to rely on the renewal clause for 20 years. If it is a rent stabilized lease, and the guarantor will not sign the lease, that is grounds to not renew the lease. I strongly suspect that the reason the tenant will not provide a copy is that he forged the guarantors name and/or he knows that the lease has materially changed.
20
@Juanita K. A carefully drafted guarantee will specifically provide that it survives changes (substantive or not) in the underlying obligation; are you saying that such a provision is ineffective?
5
No smart landlord would let a guarantor off of a lease. There's only downside for the LL, and all the benefit goes to the guarantor.
17
Exactly - there’s no benefit to the landlord to remove him from the lease.
I see these cases all the time - people putting themselves down as guarantors for leases, car loans, or putting a friend n a car loan. It doesn’t make sense because when things don’t work out or when the friend misses payments or misuses the phone, you’re on the hook.
The best thing to do would be to loan the friend the money to do what s/he needs. That way your downside is limited. If the friend needs someone to guarantee and his/her parents or close family can’t do it, then maybe the transaction/situation isn’t the best thing for them at that point in their life.
31
@Reg L
Years ago, back when banks were giving mortgages to almost anyone, I gave a then boyfriend the difficult advice to stand up to family pressure and NOT co-sign his sister's mortgage (he was single and well-employed; she was on her second husband, with six kids from him and two others, and had pretty much always been on public assistance).
Thankfully, things worked out for his sister, anyway, but the ex still thanks me for the advice, and I still consider it among the best I've ever offered. I'm not an RE genius; it's just that there's very little upside to being a guarantor or co-signer on another's obligations, unless you know exactly what you are getting into, and are willing and able to live with the result of things going wrong.
10