Your child has asked you to co-sign a lease so he or she can rent an apartment. Should you do it? Before you co-sign an apartment lease for your child, here are some things to think about.
What Are Your Obligations as a Lease Co-Signer?
As a co-signer on your child’s apartment lease, you will act as a legal guarantor that all rent will be paid as well as fees for any damages beyond normal wear and tear.
You may be subject to a credit check and employment verification in order to qualify to co-sign your child’s apartment lease, so be prepared to provide your child’s prospective landlord with your social security number, birth date, employer information and your address. Additionally, some landlords may require you to pay a fee, usually between $20 and $50, for processing your co-signer application and running the necessary checks on your financial information.
What’s the Worst That Could Happen if You Co-Sign Your Child’s Lease?
Since you’ll be legally responsible for rental payments, if rent is not received from your child on its due date, you can expect to get a phone call or certified letter asking for prompt payment.
But that’s not the worst that could happen.
If in fact your child fails to pay rent, and you, too, are unable to pay it, you’ll be in default and the missed or late payment will likely be reported to credit agencies. Missed payments and bills sent to collection agencies generally have a very negative impact on your credit report, according to the experts at Experian, one of three national reporting agencies.
A landlord, too, will have the option to take you to court in effort to recoup the money he or she is owed, and a judge will always find in the landlord’s favor if you have co-signed a lease contract.
Yet that’s still not the worst-case scenario.
Frequently a landlord will require one co-signer regardless of how many tenants are living in an apartment. If that co-signer is you, it will mean that you’re responsible not only for your child’s portion of the rent, but also his roommates’. So the worst — or at least the most maddening — thing that could happen to you as your child’s apartment lease co-signer is to end up with negative remarks on your credit report and be sued for rent payments that a roommate, whom you may not even know, failed to make.
How Can You Avoid a Bad Co-Signing Experience?
An ideal apartment lease co-signing situation is one in which your child rents an apartment alone, has his or her own source of income to pay rent and has proven himself or herself to be responsible. In this scenario, once you undergo the co-signer qualification process and sign a co-signer’s agreement, you’ll likely never hear another peep out of the landlord about missed rental payments or apartment damages.
Unfortunately, it is a rare young person who can afford to live alone. It is far more likely that your child will need to live with roommates in order to split the costs of rent and utilities.
You may ask a landlord if he or she will accept multiple co-signers on one apartment lease. Many of them won’t, however, because they don’t want to get involved in determining whose share of rent is late, or who caused apartment damages. Frankly, most landlords don’t care about who caused a problem; they just care about being paid promptly, without hassle.
If a landlord won’t accept multiple co-signers, your next step is to approach the parents of your child’s roommates. Presumably, none of them is willing, either, to take on the risks of being a single co-signer for all the roommates. So propose a separate agreement to be signed by all the parents, as advised by Inman News columnist and co-author of “Every Tenant’s Legal Guide” Nancy Portman.
The agreement, which should be written with the help of an attorney, should stipulate that parents will each be separately responsible for the financial obligations of only their own child. One parent would satisfy the landlord’s requirement for a single co-signer, but the separate parents’ agreement would protect that co-signer from paying rent or damage expenses that weren’t his or her child’s fault.
“The agreement would form the basis of a suit in small claims court,” explains Portman, in the event that one parent refuses later to compensate the co-signer for payments he or she had to make to the landlord for late rent or damages caused by another parent’s child.
For example, if three roommates each pay $350 in monthly rent and one roommate hasn’t paid in two months, the landlord is owed $700 and he or she will look to the co-signer to pay it. If the roommate in default is not the co-signer’s child, the co-signer will have the legal right, according to the agreement, to seek the money from the parents of late-paying roommate.
When to Refuse to Co-Sign Your Child’s Apartment Lease
If your child has had problems paying his or her bills in the past and you cannot easily afford to pay his or her rent — or if you simply are unwilling — you should not co-sign the apartment lease.
If you’ve never met your child’s prospective roommates and their parents, or if you have bad feelings about them based on past experiences, you should not co-sign the lease.
And last, if a landlord will not accept multiple co-signers and your child’s roommates’ parents won’t sign a parents’ agreement to be responsible for their children’s own unpaid bills, you should not co-sign the lease.
The “Ask Experian” Team, “Potential Consequences of Cosigning a Lease,” Experian.com
Janet Portman, “Parents Have Good Reason Not to Cosign Lease,” Inman.com
Author Experience in Property Management