Real Estate

Are there any caveats to having co-signers as tenants?

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[OP]
Newbie
Sep 29, 2020
38 posts
8 upvotes

Are there any caveats to having co-signers as tenants?

A prospective tenant wants to apply with a co-signer in order to boost their effective income. The tenant's net income alone is barely enough to cover the rental rent.

Are there any caveats to having co-signers vs just 1 applicant? Does this make it more difficult legally if for example rent is not paid and eviction is required?
19 replies
Deal Guru
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Mar 23, 2008
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richyrich123 wrote: A prospective tenant wants to apply with a co-signer in order to boost their effective income. The tenant's net income alone is barely enough to cover the rental rent.

Are there any caveats to having co-signers vs just 1 applicant? Does this make it more difficult legally if for example rent is not paid and eviction is required?
A co-signer gives you someone else to chase if the rent is unpaid. It doesn't change anything as far as evictions go.

If I had a co-signer, I'd vet them as carefully as the tenant, and I'd only consider them if they had their own property (i.e. not renters themselves). I'd also want their banking information. Those kind of things will assist in trying to enforce a judgement, if it comes from that.

More importantly, why are you consider a borderline tenant? If you're not getting quality applicants, you might be further ahead dropping your asking price to attract better tenants, rather than accepting the one questionable tenant that you get. Just something to think about...

C
[OP]
Newbie
Sep 29, 2020
38 posts
8 upvotes
CNeufeld wrote: A co-signer gives you someone else to chase if the rent is unpaid. It doesn't change anything as far as evictions go.

If I had a co-signer, I'd vet them as carefully as the tenant, and I'd only consider them if they had their own property (i.e. not renters themselves). I'd also want their banking information. Those kind of things will assist in trying to enforce a judgement, if it comes from that.

More importantly, why are you consider a borderline tenant? If you're not getting quality applicants, you might be further ahead dropping your asking price to attract better tenants, rather than accepting the one questionable tenant that you get. Just something to think about...

C
Right: so the issue is the original applicant claimed they had many non-pay stub income from cash-based sources, but the paystub part is definitely much lower. If the co-signer had outstanding financials, is this the same as having a sole applicant with outstanding financials to begin with?
Deal Guru
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Mar 23, 2008
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richyrich123 wrote: Right: so the issue is the original applicant claimed they had many non-pay stub income from cash-based sources, but the paystub part is definitely much lower. If the co-signer had outstanding financials, is this the same as having a sole applicant with outstanding financials to begin with?
I wouldn't consider it to be the same. The co-signer is just another avenue to pursue in the case of a judgement. It isn't the same as having a tenant with a stable and sufficient income. It's not like the tenant is likely to go ask their uncle (for example) for an extra $250 to cover their rent any given month, in most cases.

Has your tenant submitted their NoA from the CRA, which should include the "non-pay stub income"? If they're not paying appropriate taxes on their income, that would be another red flag to me. It would tell me they may only follow the rules that benefit themselves financially, and as a landlord, that's not a good thing.

Again... Why consider a borderline tenant? Let them be someone else's problem. The stronger your tenant vetting process now, hopefully the less hassles you get in the future. It should be much easier to get a good tenant in the first place than getting rid of a bad tenant later.

C
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Jun 18, 2020
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CNeufeld wrote: I wouldn't consider it to be the same. The co-signer is just another avenue to pursue in the case of a judgement. It isn't the same as having a tenant with a stable and sufficient income. It's not like the tenant is likely to go ask their uncle (for example) for an extra $250 to cover their rent any given month, in most cases.

Has your tenant submitted their NoA from the CRA, which should include the "non-pay stub income"? If they're not paying appropriate taxes on their income, that would be another red flag to me. It would tell me they may only follow the rules that benefit themselves financially, and as a landlord, that's not a good thing.

Again... Why consider a borderline tenant? Let them be someone else's problem. The stronger your tenant vetting process now, hopefully the less hassles you get in the future. It should be much easier to get a good tenant in the first place than getting rid of a bad tenant later.

C
As usual, CN nails it.

Some friend/relative thinks they're helping out little Johnny. Swoop in and save his day.

But. No way do I bet they'll pipe up the cash come time, especially in this environment.
Deal Addict
Jul 21, 2009
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Toronto
No caveats, just benefits. If they don't pay rent then you have two people to chase down for money instead of one. Definitely interview and do your due diligence on both applicants before accepting.

There are many reasons for co-signing and IMO its borderline scummy to dismiss someone just because they need one.
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Jan 2, 2012
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richyrich123 wrote: Right: so the issue is the original applicant claimed they had many non-pay stub income from cash-based sources, but the paystub part is definitely much lower. If the co-signer had outstanding financials, is this the same as having a sole applicant with outstanding financials to begin with?
Put somewhere on the lease form that co-signer needs to read and sign, that if tenant fails to pay the rent and is evicted, both them and the co-signer will eventually be sued and/or have credit damaged. Make sure the co-signer knows what they are signing up for. This will cause the co-signer to step in and help the tenant to meet monthly rent if it comes to that, or refuse to sign as a co-signer in the first place.

Some co-signers don't really understand what they're signing up for and what they're potentially liable for.

Of course if it comes down to an eviction, suing and going to collection, you've already lost. So best to get a tenant that will avoid all that in the first place.
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Mar 23, 2008
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submarine wrote: No caveats, just benefits. If they don't pay rent then you have two people to chase down for money instead of one. Definitely interview and do your due diligence on both applicants before accepting.

There are many reasons for co-signing and IMO its borderline scummy to dismiss someone just because they need one.
Sure, I can envision some reasons where a co-signer isn't necessarily a bad thing. Like a parent co-signing for an adult child that's going to university. But someone who says they have sufficient income but can't prove it because it's paid under the table? Not so much.

And having two people to chase still means having to chase people to try to collect after the fact. Better to spend time picking a tenant who is likely to be able to pay in the first place. If that's "scummy" then call me Scum. As a landlord, your first priority should be protecting your assets and your finances. AFAIK, my bank doesn't take karma points to pay the mortgage or property taxes. The government offers enough protections to tenants already; if they want to subsidize borderline tenants with our tax dollars, then I guess that's what they need to do.

And to go along with all this... The OP has another thread going, where they identify the rental price is $2600/month, plus utilities. If a tenant has problems qualifying for that because of their income, perhaps they need to lower their sites a bit (or a lot). Like sharing a place, or finding a cheaper basement suite, or moving out to the 'burbs to save money. As a landlord, it's not your problem.

C
[OP]
Newbie
Sep 29, 2020
38 posts
8 upvotes
CNeufeld wrote: I wouldn't consider it to be the same. The co-signer is just another avenue to pursue in the case of a judgement. It isn't the same as having a tenant with a stable and sufficient income. It's not like the tenant is likely to go ask their uncle (for example) for an extra $250 to cover their rent any given month, in most cases.

Has your tenant submitted their NoA from the CRA, which should include the "non-pay stub income"? If they're not paying appropriate taxes on their income, that would be another red flag to me. It would tell me they may only follow the rules that benefit themselves financially, and as a landlord, that's not a good thing.

Again... Why consider a borderline tenant? Let them be someone else's problem. The stronger your tenant vetting process now, hopefully the less hassles you get in the future. It should be much easier to get a good tenant in the first place than getting rid of a bad tenant later.

C
Thanks for the response. I'll see what the tenant says about the NoA as I wait for more qualified tenants.

On a related note: what's your process for validating the documents they send in are not modified in any way? For example, it seems easy enough for someone to just edit their electronic NoA in the HTML and send that copy in.
Sr. Member
Dec 3, 2019
510 posts
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Ontario
IMO getting a judgement issued against a co-signor who is not an actual tenant might be tough in Landlord Tenant Board.

The Landlord might need to go to small claims or even superior court for judgement to be issued.

I use co-signors myself but could not find a definite answer on how Landlord Tenant Board would treat it.
Also the difference between a "co-signor" who goes on the lease as a tenant vs. a "guarantor" who signs a separate agreement

LTB essentially has the right to overwrite contract law, and they are not interested in landloards adding things to RTA.
Deal Fanatic
Jul 3, 2011
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Thornhill
buysellbuy wrote: IMO getting a judgement issued against a co-signor who is not an actual tenant might be tough in Landlord Tenant Board.

The Landlord might need to go to small claims or even superior court for judgement to be issued.

I use co-signors myself but could not find a definite answer on how Landlord Tenant Board would treat it.
Also the difference between a "co-signor" who goes on the lease as a tenant vs. a "guarantor" who signs a separate agreement

LTB essentially has the right to overwrite contract law, and they are not interested in landloards adding things to RTA.
It's only tough if the lease agreement does not specifically state that in the event of default of any part of the lease agreement by the tenant, the co-signer becomes obligated to immediately correct the tenant's default. This means that the LTB can treat the co-signer the same as the tenant and issue a judgement against them. This piece is missing from the comments in here as well as in most leases because people just presume a co-signer immediately picks up the default.

Without such a clarification in the lease agreement, the landlord can only go after the tenant via the LTB and would have to wait for judgement against the tenant and then file a suit in court against the tenant and the co-signer.
Deal Expert
Feb 29, 2008
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Tarrana & The Ri…
If you are iffy on a tenant (especially with financials) move on. If you’re in Ontario, it is too much of a gamble to roll the dice. You are stuck with them for a long time even if you try to evict.

Your recurrent tenant wouldn’t even pass my initial screening so that would be a no for me.

I’ve rented to students on a number of occasions but the cheques come from the parents who are also in the lease. The parents provide me with their financials. These are rich people with stable high incomes and assets. I wouldn’t accept anything less. Most times I would have already met the parents or spoken with them over the phone I’d they’re from out of town.

Move on
Deal Addict
Jul 21, 2009
1493 posts
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CNeufeld wrote: Sure, I can envision some reasons where a co-signer isn't necessarily a bad thing. Like a parent co-signing for an adult child that's going to university. But someone who says they have sufficient income but can't prove it because it's paid under the table? Not so much.

And having two people to chase still means having to chase people to try to collect after the fact. Better to spend time picking a tenant who is likely to be able to pay in the first place. If that's "scummy" then call me Scum. As a landlord, your first priority should be protecting your assets and your finances. AFAIK, my bank doesn't take karma points to pay the mortgage or property taxes. The government offers enough protections to tenants already; if they want to subsidize borderline tenants with our tax dollars, then I guess that's what they need to do.

And to go along with all this... The OP has another thread going, where they identify the rental price is $2600/month, plus utilities. If a tenant has problems qualifying for that because of their income, perhaps they need to lower their sites a bit (or a lot). Like sharing a place, or finding a cheaper basement suite, or moving out to the 'burbs to save money. As a landlord, it's not your problem.

C
What I disagree with is your over eagerness to dismiss tenants just because they need a co-signer. There is so much more to vetting a tenant than looking at their income.

I've turned down tenants that offered the full years rent upfront because I felt they were not a good fit. A low income applicant coming to a landlord with a co-signer should have equal consideration as a single applicant with higher income. There is no shortage of stories when it comes to high income tenants not paying rent.

The whole idea of "borderline tenant" is also silly. Landlords shouldn't consider tenants who need a co-signer? Who's drawing these lines? Many tenants looking to rent in the hot markets like the GTA are offering 6-12 months rent upfront to secure a house and landlords are starting to expect it. Is this going to be the new "borderline" for tenants next year?
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Mar 23, 2008
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submarine wrote: What I disagree with is your over eagerness to dismiss tenants just because they need a co-signer. There is so much more to vetting a tenant than looking at their income.

I've turned down tenants that offered the full years rent upfront because I felt they were not a good fit. A low income applicant coming to a landlord with a co-signer should have equal consideration as a single applicant with higher income. There is no shortage of stories when it comes to high income tenants not paying rent.

The whole idea of "borderline tenant" is also silly. Landlords shouldn't consider tenants who need a co-signer? Who's drawing these lines? Many tenants looking to rent in the hot markets like the GTA are offering 6-12 months rent upfront to secure a house and landlords are starting to expect it. Is this going to be the new "borderline" for tenants next year?
Hey, if you want to hand over the keys to your single largest investment tool to someone who can't demonstrate an ability to pay you, knock yourself out. But if I was a landlord in Ontario, I wouldn't want to sign up to be a form of subsidized housing. It's WAY too difficult to get a problem tenant out. Having a co-signer gives you another person to try to collect money from after the fact, but it doesn't stop the problem in the first place.

The OP was asking for opinions. I've stated mine, you've stated yours. No skin off my nose if he agrees with me or not.

C
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Mar 23, 2008
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richyrich123 wrote: Thanks for the response. I'll see what the tenant says about the NoA as I wait for more qualified tenants.

On a related note: what's your process for validating the documents they send in are not modified in any way? For example, it seems easy enough for someone to just edit their electronic NoA in the HTML and send that copy in.
Validating the information you get is always an exercise. It's easy to modify a screenshot or PDF document. Some things, you can verify (like employment) but even then you have to be cautious (google "Vandelay Industries", as an example). Other things, if you feel hinky about them, you can get them to do in front of you (like log into their laptop and pull the NoA from the CRA website while you're there). You have to play things by ear.

C
Sr. Member
Jul 18, 2020
753 posts
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submarine wrote: What I disagree with is your over eagerness to dismiss tenants just because they need a co-signer. There is so much more to vetting a tenant than looking at their income.

I've turned down tenants that offered the full years rent upfront because I felt they were not a good fit. A low income applicant coming to a landlord with a co-signer should have equal consideration as a single applicant with higher income. There is no shortage of stories when it comes to high income tenants not paying rent.

The whole idea of "borderline tenant" is also silly. Landlords shouldn't consider tenants who need a co-signer? Who's drawing these lines? Many tenants looking to rent in the hot markets like the GTA are offering 6-12 months rent upfront to secure a house and landlords are starting to expect it. Is this going to be the new "borderline" for tenants next year?
Business is business period, no need to show any empathy towards any stranger especially we are talking about a 500K + investment. Right now we are not in a renters market, so there is no need to compromise. I think JayLove06 is right, only parents cosign for their kids can take into consideration.
Deal Expert
Feb 29, 2008
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lechan wrote: Business is business period, no need to show any empathy towards any stranger especially we are talking about a 500K + investment. Right now we are not in a renters market, so there is no need to compromise. I think JayLove06 is right, only parents cosign for their kids can take into consideration.
Indeed. Go through 11 years of being a landlord in Ontario, you learn that you have to treat everything like a business. There are no protections in Ontario, so you have to be picky.
Deal Addict
Jul 21, 2009
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JayLove06 wrote: Indeed. Go through 11 years of being a landlord in Ontario, you learn that you have to treat everything like a business. There are no protections in Ontario, so you have to be picky.
Well I am not quite at 11 years yet as a landlord. Just two not counting the three years of 0$ rent to family members but I still strongly believe a little empathy goes a long way in business :)
Deal Expert
Feb 29, 2008
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submarine wrote: Well I am not quite at 11 years yet as a landlord. Just two not counting the three years of 0$ rent to family members but I still strongly believe a little empathy goes a long way in business :)
Talk to me when you reach 11 years. I doubt you'll feel that way with regards to renting in Ontario.
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Sep 8, 2007
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submarine wrote: Well I am not quite at 11 years yet as a landlord. Just two not counting the three years of 0$ rent to family members but I still strongly believe a little empathy goes a long way in business :)
Here the risks are skewed against you as a landlord if that empathy turns you into the fall guy. You can’t just padlock the premises as in a commercial business.

Bottom line for me, I evaluate tenants on the basis themselves and that’s it. Co-signers are for the most part useless in this province. And it does nothing if a tenant stops paying or destroying your place.

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