In order to move into a rental property, you cannot sign a contract without a guarantor.
However, due to the recent aging population and the influx of foreigners into the country, many people find themselves unable to ask anyone to act as a guarantor.
Some people may have given up on signing a rental contract because they feel they cannot rent a room because they do not have a guarantor.
However, there is actually a way to rent a room without a guarantor.
In this article, we will explain why a guarantor is necessary for renting housing, how to enter into a rental contract even without a guarantor, and how to join a rent guarantee company.
Why do you need a guarantor to rent an apartment?
Generally, when signing a rental contract, you will need a guarantor or a joint guarantor.
We have summarized the reasons why you need a guarantor in two points. First, let's understand the following two reasons.
- To collect rent on behalf of tenants when rent is overdue
- To claim damages on behalf of the tenant
To collect rent on behalf of tenants when rent is overdue
If the tenant does not pay the rent, the landlord can claim the rent from the guarantor.
Landlords rely on rental income to maintain their properties, so if tenants fail to pay rent they cannot maintain the property.
In the unlikely event that a tenant runs away in the middle of the night, you can claim rent from the guarantor or co-signer.
To claim damages on behalf of the tenant
Tenants are obligated to restore the rental property to its original condition when they move out.
Restoration means returning the room to the way it was before occupancy.
For example, the room will be left clean and free of any stains, and the property will be returned to the landlord in a state where the water heater, air conditioner, etc. are in working order.
If you leave the room with any damaged or soiled equipment, you will be obligated to pay compensation to the landlord.
If the landlord determines that the tenant is unable to pay the compensation costs, he or she can also claim compensation from the guarantor.
The difference between a guarantor and a joint guarantor
There is a difference between a guarantor and a cosigner, and lenders specifically require you to have a cosigner.
Why do lenders need to insist on a cosigner rather than a guarantor?
First, let me explain the difference between a guarantor and a joint guarantor.
The difference between a guarantor and a joint guarantor
If the landlord asks for advance payment of rent, the guarantor can insist that the landlord make the request to the tenant himself/herself first.
However, a guarantor cannot insist that the person make the offer.
The guarantor will bear the same responsibilities as the tenant.
In the Civil Code, the right to insist that a tenant make a claim is called the "right of defense."
A guarantor is granted the right of defense, but a joint guarantor is not granted the right of defense.
In addition, if there are multiple guarantors, each has the "right to divide" and can claim a share of the debt (such as unpaid rent). However, a joint guarantor does not have that right, and so will be held liable for the debt alone.
A guarantor carries a heavy responsibility
A guarantor bears heavy responsibility and does not have the right to refuse a claim or demand division of the amount, as a guarantor does.
As a result, you will be held fully responsible for all damages incurred by the tenant.
Because of the heavy responsibility, people are limited to asking relatives to be guarantors. However, there are people who do not have relatives nearby or cannot rely on relatives due to family circumstances.
Although there is no legal problem with asking an acquaintance to be a guarantor, it is not recommended as it may cause problems in your interpersonal relationships.
It is also important that the guarantor understands their role and the risks involved.
It is difficult to become a guarantor unless you have the income or assets to provide a financial guarantee against the misconduct of others.
The scope of liability of guarantors is limited due to the revision of the Civil Code
The Civil Code was revised in 2017, clarifying the scope of liability of guarantors.
Prior to the amendment, the guarantor's agreement to the landlord simply stated that, jointly and severally with the tenant, "shall be liable for all debts arising from this contract. The same shall apply in the event that this contract is renewed."
Furthermore, there was no need to clearly state in the lease agreement the scope of the guarantor's liability or the maximum amount to be guaranteed.
However, in recent years, the financial risks borne by guarantors have become high and frequent problems have become a problem, so in 2017 the Civil Code was revised to set maximum amounts for guarantor contracts.
In addition, the scope of the guarantor's liability has been stipulated, and there is no need for them to assume liability beyond that scope.
To help you understand more, we have summarized the following three points regarding guarantors.
- A maximum amount is set
- A joint contract without a specified maximum amount is not permitted.
- Obligation to disclose tenant information to guarantor
A maximum amount is set
The maximum amount is the maximum amount that a guarantor will compensate.
Examples of specified amounts include "the maximum amount is 1 million yen" or "the maximum amount is two months' rent and common charges at the time the contract is concluded," etc.
There are no clear standards for setting the maximum amount, so the guarantor, the tenant, and the landlord will discuss how much each party can guarantee.
In addition, the Ministry of Land, Infrastructure, Transport and Tourism has released reference materials on setting maximum amounts in accordance with the revision of the Civil Code. The average limit is set as follows:
| rent | Average maximum amount |
|---|---|
| Rent: under 40,000 yen | 177,000 yen |
| Rent: 40,000 to 80,000 yen | 282,000 yen |
| Rent: 80,000 to 120,000 yen | 500,000 yen |
| Rent: 120,000 to 160,000 yen | 712,000 yen |
| Rent: 160,000 to 200,000 yen | 973,000 yen |
| Rent: 200,000 to 300,000 yen | 1,262,000 yen |
| Rent: 300,000 to 400,000 yen | 1,568,000 yen |
| Rent: 400,000 yen or more | 4,373,000 yen |
The most common rent range for single people is between 40,000 and 80,000 yen, with the upper limit being nearly 300,000 yen.
When deciding on the maximum amount with the landlord, you will need to refer to materials such as these to determine the amount.
A joint contract without a specified maximum amount is not permitted.
The scope of a guarantor's liability is defined as "principal of the debt," "interest on the debt," "penalty charges," "damages," and "other debts arising."
Obligations under a rental contract include rent and property belongings.
When appointing a guarantor, the contract will not accept it unless the maximum amount is clearly stated.
In addition, the scope of liability is limited to the above. With the scope of liability clearly defined, the risk borne by the guarantor has been limited.
Obligation to disclose tenant information to guarantor
Tenants are obligated to disclose information about their income, assets, and liabilities (such as loan details) to the guarantor.
Before the amendment, there was no obligation to disclose tenant information, so there were cases where guarantors were unaware of the large risks they bore and ran into trouble.
To prevent such problems, disclosure of tenant information has been made mandatory.
If the tenant fails to disclose information to the guarantor, the contract may be invalidated.
To avoid any problems, be sure to disclose all your information to your guarantor.
How to rent a house without a guarantor
Even though the scope of a guarantor's liability is limited, some people may feel hesitant to ask someone to be a guarantor.
In fact, there is a way to enter into a rental contract without having to provide a guarantor.
In recent years, due to the declining birthrate and aging population, as well as the increase in foreign residents, owners are increasingly using rent guarantee companies.
There are also properties available that do not require a guarantor, or that allow you to pay rent by credit card.
Here we will explain the following three ways to enter into a rental contract without a guarantor.
- Use a rent guarantee company
- Find properties that don't require a guarantor
- Paying rent with a credit card
Use a rent guarantee company
Rent guarantee is a service that compensates landlords for expenses in the event of rent arrears.
In recent years, real estate owners have also been using these facilities to attract tenants.
We will explain the characteristics of rent guarantee companies and how to join them.
The role of rent guarantee companies
A rent guarantee company is a company that guarantees rent to landlords when tenants are behind on their rent payments.
They truly play the role of a guarantor.
In addition to rent, there are also companies that guarantee restoration costs, early eviction penalties, litigation costs, and removal costs of remains.
How to join a rent guarantee company
To join a rent guarantee company, you will join a guarantor company designated by the landlord or property management company.
However, there are cases where a real estate company does business with multiple guarantor companies, in which case you will have several companies to choose from.
To join, you apply by submitting identification (driver's license or health insurance card) and documents showing your income (a copy of your tax withholding slip and final tax return).
Documents to be submitted to the rent guarantee company
- Identification documents (driver's license, health insurance card)
- Documents showing income (company employee: tax withholding slip; self-employed: copy of tax return or income certificate)
- Certificate of employment (if requested by the rent guarantee company. In most cases, employment can be verified by your health insurance card)
To utilize the rent guarantee, you need to be screened.
To take advantage of the rent guarantee, you will need to undergo an examination.
The screening criteria vary depending on the company, but the first condition is that you have a stable income.
Other criteria are as follows:
company employee
- Workplace
- annual income
- Length of service (3 years or more is recommended)
- Employment status (those with a contract for services are considered self-employed)
self-employed
- Occupation
- Annual income (Proof of income may be required)
- Bank balance (may be required)
In addition, the rent guarantee company will carry out the following inspections:
Credit company-affiliated rent guarantee company screening
- Credit card overdue status
- Are monthly payments paid on time?
Rent Guarantor Company Screening
- A history of non-payment of rent and forced eviction when using a guarantor company in the past
The application process will be conducted in the same manner as when applying for a credit card, and it will take 2 to 7 business days for the results to be known.
If, by any chance, you fail the screening by the guarantor company designated for the property, you will have to find another property.
Even if you fail the screening, there are cases where you can sign a contract with another guarantor company.
So, don't give up and try consulting with the real estate company about a guarantor company.
Rent guarantee fee
The guarantee fee for rent guarantee varies depending on the guarantor company and the contents of the guarantee.
Generally, the guarantee fee is 50% to 100% of the rent or two months' rent, and most companies have a guarantee period of two years.
Payment is made at the time of signing the property contract and at the time of renewal.
What not to do when using a rent guarantee company
One thing you should never do when being screened by a rent guarantee company is to be late with your credit card or loan payments.
We explained that there is an examination process when using rent guarantee.
In addition to employment status, some companies also use loan and credit card overdue status as a criterion for screening.
The information that manages your borrowing status is called personal credit information, and is a credit agency to which credit card companies and financial institutions belong. Information on late or non-payment of credit card payments is registered.
Be careful, because if you have a record of late payments or non-payment on your personal credit information, you may not pass the rent guarantee company's screening.
Find properties that don't require a guarantor
We have explained how to join a rent guarantee company, but there are also ways to find properties that don't require a guarantor in the first place.
Properties that do not require a guarantor are often found among those managed by the Urban Renaissance Agency or public corporations.
You can also search for properties that do not require a guarantor on real estate portal sites.
One thing to be aware of is that pre-tenancy screening is strict and there may be some kind of problem with the property.
For example, there may be properties that are in a bad location and difficult to find tenants for, the building is scheduled for demolition, or it has been the subject of an accident, or there may be other reasons for the property.
Therefore, be sure to ask the real estate company in advance why a guarantor is not required.
Paying rent with a credit card
There are some properties where you can pay rent with a credit card and not need a guarantor.
People who have credit cards are considered to be creditworthy. Furthermore, you cannot have a credit card unless you have a stable income.
Nowadays, you can find properties that accept card payments on many property search sites.
The disadvantage is that a small percentage of the payment fee is charged along with the rent.
However, if you pay your rent with a card, you can earn a lot of points. About half of the fees are refunded, so it is also recommended for those who are into points.
summary
This time, we explained about rental contracts when you do not have a guarantor.
In recent years, the number of people who cannot ask for a guarantor has increased due to the aging of parents and the immigration of foreigners. Also, there are many people who feel uneasy about having a guarantor.
In that case, there are various options available, such as using a rent guarantee company, finding a property that does not require a guarantor, or paying rent by credit card, so try looking for these conditions when choosing a rental property.
In addition, rent guarantee companies are companies that guarantee rent to landlords when rent is overdue, but even joining them requires an screening process.
The screening criteria vary depending on the guarantor company, but the decision will be based on whether you have a stable income and whether you have any late payments on your card or loan payments, so it's important to understand these points.
Many people worry about guarantors when renting a property, but we hope this article will be helpful in showing you how to rent without a guarantor.
