Co-signers carry a big responsibility


March 27, 1994|By George B. Laurent

There are times when a tenant needs a co-signer. Perhaps the tenant is a young person who has yet to establish a rent or employment record. Or the tenant's credit record is not good.

Sometimes a tenant, through frugal spending habits, can actually pay the required rent, but doesn't meet the basic income requirements of the industry.

Most professional landlords require that a tenant's yearly rent not exceed 30 percent of his gross income -- that is, salary before deductions such as taxes. To qualify for an apartment renting for $6,000 per year, a tenant must have $18,000 gross income.

If, by any chance, a tenant has significant savings, he or she can probably negotiate a year's lease by paying a significant amount of rent in advance. For most people, the most feasible procedure to seek a co-signer. A landlord does not have to accept a co-signer, but many companies will.

A co-signer, to be acceptable, usually has to meet all the qualifications of a tenant who would normally qualify for the apartment: good credit and employment record and sufficient income. It helps to have a co-signer who lives in Maryland, though some companies will accept co-signers who live out of state.

Co-signing a lease is a serious responsibility that should not be taken lightly.

Nor should tenants seeking a co-signer underestimate the risk that they are asking someone to assume.

If a tenant cannot really afford the apartment or can't budget his money properly and defaults on the lease, then most landlords will seek payment from the co-signer even if they have to take him or her to court.

It is amazing that many tenants and co-signers think that, because the co-signer is "innocent," somehow he or she will not be held accountable.

The co-signer must know whether he or she is responsible for only the first year of the lease or for all renewals thereafter -- as is usually the case. If the tenant has been paying rent on time during the first year, and should the tenant's income improve enough to have the apartment on his or her own, then before the current lease renews, he or she should seek to have a non-co-signed lease for the future.

If the tenant is unwilling to do this, and the co-signer wants to be relieved of future potential liability, then the co-signer should send a written notice to the landlord, before the lease renews, that at the end of the current lease he or she will no longer be a co-signer.

Sometimes, especially in the case of students, there are three co-signers -- perhaps one from Maryland and two from out of state.

The Maryland co-signer and the Maryland tenant should be aware that the landlord can sue one or all of the co-signers and it is easier to sue locally than out of state.

If the Maryland co-signer has income and assets enough, he or she may be the only one sued -- and then would have to sue the other co-signers.

So, using a co-signer may enable you to rent the apartment you really want.

However, if you are a tenant seeking a co-signer, you need to fully realize the risk you are asking another person to take for you. It may be better to seek more modest accommodations until you have rectified your credit or have a better employment record and income.

George B. Laurent is executive director of BNI, or Baltimore Neighborhoods Inc., a private non-profit group that works to resolve tenant-landlord problems and to eliminate housing discrimination.

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