Updated government guidance on the Tenant Fees Act has raised questions about the validity of professional rent guarantor contracts issued before the Renters’ Rights Act came into force on 1 May 2025.
The Ministry of Housing, Communities and Local Government has warned landlords and letting agents that existing guarantor agreements may be affected by the new legislation, though the guidance lacks specific detail on what changes may be required.
Prohibited payments concern
The updated guidance clarifies that whilst tenants may choose a professional rental guarantor service, it becomes a prohibited payment if they are required to take out such insurance without being given the opportunity to select their own provider.
According to the guidance: “If a guarantor agreement was entered into before 1 May 2026, then the terms of that agreement may be affected by the tenancy reforms included in the Renters Rights Act. Guarantors should consider reviewing any existing guarantor agreements in place and obtain the consent of the landlord to any variations to the agreement that may be required.”
The guidance suggests that guarantors may wish to seek independent legal advice if unclear whether their agreement is affected. The Ministry of Housing, Communities and Local Government has not yet provided clarification on what specific variations may be required.
Market impact
Recent research indicated that following the legislative changes, approximately half of all tenants are likely to require a guarantor when entering a new tenancy. This development adds complexity to an already challenging rental market across England and Scotland.
Bruce Evans, Chief Commercial Officer at RentGuarantor, stated that the company’s customer contracts have been reviewed internally to ensure compliance. “Our customer contracts have been reviewed internally – including those in place before the new rules were implemented – to ensure full compliance,” Evans said.
Evans noted that agencies not offering tenants a choice of rent guarantor providers could find themselves in breach of the Act. “This could apply to situations where agencies recommend a single choice of provider without an alternative, and also if a tenant brings in their own provider which is declined for reasons that suit the agent,” he said.
Industry implications
The guidance creates potential compliance challenges for letting agents and landlords managing existing tenancies with guarantor agreements. The requirement for tenant choice in selecting guarantor services represents a shift from previous practice where agents often specified particular providers.
The development adds to recent regulatory changes affecting the rental sector, creating additional administrative considerations for property professionals managing tenancies established before May 2025.
Industry professionals await further clarification from the government on the specific variations required to bring pre-existing guarantor agreements into compliance with the new legislation.
