One feature of property management contracts we receive a lot of questions about is the Tenant Guarantee.  What exactly is a Tenant Guarantee?  What does it cover?  How does it work?  What is NOT covered?

The best property managers have developed and honed their screening criteria to identify a highly qualified and reliable tenant.  In doing this, professional property managers significantly reduce their client’s exposure to evictions.  By using a highly effective and proven screening process a property manager can offer a guarantee to the owner when placing tenants into a rental property.

What is a Tenant Guarantee?

A Tenant Guarantee is a guarantee that the tenant will perform according to the lease.  A tenant who does not perform according to the lease will trigger the Tenant Guarantee.  It is important to understand what kind of situations the management contract consider to be “triggers” of the guarantee.

How Does it Work?

Tenant Guarantees vary in the length of time in which they are valid.  Most are valid between 30-90 days from the first day of the lease and others may be valid for 6 months or even 1 year.  If a tenant moves out without good cause, owner approval, breaks the lease or gets evicted from the home while the Tenant Guarantee is in effect, the guarantee is triggered.

What does the Tenant Guarantee Cover?

A Tenant Guarantee covers the cost related to finding and placing a screened and qualified tenant into a rental home – commonly know as a “Leasing Fee” or “Tenant Placement Fee”.  Under most Tenant Guarantees a new tenant will be found without the owner having to pay a second Leasing Fee to the property manager.

What is NOT covered by the Tenant Guarantee?

A Tenant Guarantee does not cover the costs of turnover or repairs, unpaid rent or attorney fees (your manager may offer other plans to cover these costs).  A tenant guarantee is commonly limited to finding a new tenant without the owner incurring an additional Leasing Fee. A Tenant Guarantee is not a refund of the original fee paid. 

I hope this has given you a better understanding of a Tenant Guarantee but if you still have questions please contact us by phone at 616-301-9450 in Grand Rapids or 269-220-6033 in Kalamazoo!

About the author

Aaron has over 13 years experience in property management. With a focus on accounting and the “numbers” aspect of real estate, he loves to see a good investment succeed. He also enjoys talking to new investors and helping them overcome hurdles to their success.