According to a new study by LRG, more than half of landlords are now more frequently requesting guarantees from prospective tenants who do not comfortably meet standard credit checks. This change is a direct consequence of the Renters' Rights Act, which no longer allows owners to demand more than one month's rent in advance. The introduction of these legal restrictions is influencing landlords' risk management.
The new legislation, which aims to reduce the financial burden for tenants when renting a property, is leading landlords to reassess their security arrangements. The ability to demand larger advance payments previously served as a form of security against potential payment defaults or delays. With this option no longer available, landlords are seeking alternative methods to protect their financial interests.
Impacts of rent price regulation
The need for guarantees particularly affects those tenants whose income or employment circumstances fall just below the thresholds set by landlords or their administrations. These could include, for example, young professionals, students, or self-employed individuals whose proof of income is deemed less stable. A guarantee in such cases offers additional security and often facilitates the conclusion of a tenancy agreement, even if it represents an additional obligation for the tenant and the guarantor.
The LRG study suggests that this development is not merely a temporary adjustment but represents a longer-term trend in managing rental risks. Landlords must continue to strike a balance between fulfilling legal requirements and ensuring reliable rental income. The increased demand for guarantees is a clear indication of how the market reacts to regulatory interventions by establishing alternative security mechanisms.
Future market developments
It remains to be seen how this practice will affect the rental market in the long term. On the one hand, it could help provide access to housing for certain groups who would otherwise struggle to meet credit requirements. On the other hand, it could mean increased financial responsibility for guarantors and make decision-making in the search for accommodation more complex. The analysis highlights the need for tenants to prepare for such requirements and, if necessary, arrange for a guarantor in advance.
