Can a guarantor be liable if the rent increased after he signed the guarantee?

Here is a question to the blog clinic from Carol (not her real name) whose uncle is a guarantor:

My Uncle agreed to act as rent guarantor for my Sister and signed a ‘Rent Guarantor Form’.

Unknown to my Uncle, six months after the original tenancy agreement was signed my Sister signed a new tenancy agreement with a significant increase in rent.

The landlord contacted my uncle to cover rent arrears at a various times but always asked for the original rent amount which my Uncle paid (so the higher rent figure was never sought by the landlord).

However, more than a year later a demand for payment has been received. The claim is for the difference between the original rent and the increased rent amount on the second tenancy agreement for the last 16 months. The landlord is threatening court action.

Is my Uncle liable for this substantial sum and does he continue to be liable for any future rent arrears at the increased sum, which he knew nothing about?

Answer

No. The guarantee would have ended automatically when your sister signed a new tenancy agreement at a higher rent.

When your Uncle agreed to guarantee your sister he agreed to guarantee a tenancy at a rent of £A. When your sister signed a new tenancy at rent £B – that is not the tenancy which your uncle agreed to guarantee. He cannot be held liable for something he did not agree to. His guarantee was only in respect of the earlier tenancy.

Even if the wording of the guarantee appears to provide for rent increases – this will be unenforceable as an ‘unfair term’. He cannot be liable for something he has not specifically agreed to.

I would suggest that your Uncle writes to the landlord saying the guarantee he signed was in respect of the earlier tenancy at £A and that his liability would have ceased after the new tenancy at rent £B came into force. The payments made by him were therefore paid under a misapprehension and he is entitled to claim them back.

He could go on to say that (without prejudice) he is willing to let the matter drop in respect of the payments made.

However, if a claim is made against him for the increased rent, he will defend (on the basis that his guarantee has now ended) and counterclaim for the payments made by him in respect of rent for the second tenancy, as he was not liable for those payments which were paid by him in under a misapprehension.

If a letter like that is sent to the landlord is it likely that he will quietly drop the claim, particularly if he takes legal advice.