Cosigning on an Apartment Lease: Liability Consequences
Someone who “cosigns” a lease signs the lease. Even though the term “cosigner” sounds as it means you have a lesser role, or somehow only come into play as a back-up (like a “copilot”), in actually anyone who signs a lease is fully liable on the lease. That means that cosigners are potentially liable for damage to the premises, for example, or for legal claims against the apartment or leased premises; they are potential liable to the same extent as anyone else on the lease, even if the cosigner does not reside there. Therefore, to cosign a lease is to expose yourself to all the potential liability that being a tenant could expose you to.
Guaranteeing payment under a lease therefore limits your liability to “only” any monies due (such as the rent) under the lease. As a guarantor, your liability is limited to that which you specifically undertake or assume—in this case, the tenant’s monetary obligations to the landlord under the lease.
However, before guaranteeing (or cosigning), think very carefully about the responsibility you’re assuming. Suppose the tenant loses his or her job—and so can’t pay the rent—or worse, simply chooses to not pay? Are you prepared to pay for an apartment that’s not yours and you’re not using (and can you afford to do that)? If you are not prepared to take over the tenant’s obligations and pay on his or her behalf, then you should not guarantee (or cosign) a lease.
If you still want to guarantee or cosign, there are some ways you should consider to protect yourself:
1) Would the landlord accept a guarantee for less than the full rent? That would limit your exposure.
2) Does the tenant have any other assets in which they could give you a security interest (e.g. a car) to provide something to “cover” part of your obligations?
3) Have the tenant execute an agreement to you that if they default and you are forced to pay under the guarantee, you could collect from the tenant not just what they owe under the lease but also your own attorney’s fees or other costs in asserting your rights.
You should consult with an attorney to help you draft a guarantee, and to also consider what other steps you could put in place to protect yourself.