A rent guarantee company (rent payment guarantee company) is a company that covers the payment when a tenant falls behind on rent. Because it makes it possible to rent a property even when you cannot find a joint guarantor, its use has increased in recent years. This article explains in detail the role of rent guarantee companies, the screening process, the reasons applications are rejected, and how to respond.
What Is a Rent Guarantee Company, and What Role Does It Play?
A rent guarantee company is a company that covers costs on behalf of a tenant when rent is not paid. Because it serves in place of a joint guarantor, you can rent a property even if you do not have someone close to you who can act as a guarantor.
How the Guarantee Fee Works
The tenant signs a rent guarantee agreement and pays a guarantee fee. The fee is typically equal to 0.5 to 1 month of rent at the initial payment, and it is generally charged as part of the upfront costs together with the deposit and key money. The contract period is usually 1 to 2 years, and a renewal fee applies at renewal (a fixed amount of around 10,000 yen, or 10 to 30% of the rent). Unlike a deposit, the guarantee fee is not refunded.
What Is Covered
In general, the following costs are covered.
- Rent, common service charges, and management fees
- Renewal fees
- House cleaning costs and key replacement costs
- Penalty charges and restoration costs at move-out
- Legal costs related to rent nonpayment disputes
However, the scope of coverage differs by plan, so advance confirmation is necessary.
How It Differs From a Joint Guarantor
A rent guarantee company covers only the financial aspect. Unlike a joint guarantor, it cannot advise or caution the tenant about their lifestyle or behavior.
What Are the Three Types of Rent Guarantee Companies?
There are three types of rent guarantee companies: independent, association-based (LICC member), and credit-based. The strictness of screening differs among them.
| Type | Screening Standard | Features |
|---|---|---|
| Independent | Own standards (more lenient) | They do not check credit information or rent delinquency history. Guarantee fees are slightly higher |
| Association-based (LICC) | Information is shared among LICC member companies | A past delinquency record with a member company is a disadvantage. Data is stored for 5 years after the contract ends |
| Credit-based | Credit information is checked (stricter) | Credit card delinquency and personal bankruptcy are also reviewed. Guarantee fees are lower |
Because landlords often specify the rent guarantee company, tenants may not be able to choose one themselves.
How Does Screening by a Rent Guarantee Company Work?
The screening process follows these four steps.
- Submit required documents：Submit identification, proof of income, a residence certificate, documents for the joint guarantor, and related materials through the real estate company
- Screening is conducted：The company checks the applicant's character, ability to pay rent, and related points
- Identity confirmation contact：In some cases, the joint guarantor's intention to proceed is confirmed
- Result notification：The result usually arrives within about one week
Why Is an Application Rejected by a Rent Guarantee Company?
The main reasons an application does not pass screening are as follows.
Income is insufficient
As a general guideline, rent should be no more than 30% of take-home pay, and if it exceeds that level, the applicant's ability to pay may be questioned.
There is a history of rent delinquency
If you previously used a guarantee company and fell behind on payments, that information is shared among guarantee companies. If it was a simple oversight of about one month, the impact is usually limited, but repeated delinquency has a major effect on screening.
There is negative credit information
Records of missed payments on credit cards or loans remain on file for 5 to 10 years. This is a particularly important screening point for credit-based guarantee companies.
There is negative information online
Many guarantee companies search the applicant's name online and on social media during screening. Defamatory posts or photos that create a poor impression may affect the screening result.
What Can You Do If You Fail Screening?
Even if you are rejected once, you may still pass the next screening if you make the right improvements.
- Identify the issues and improve them：If appearance or attitude is the cause, improve those points; if your income does not match the rent, lower the property level you are targeting
- Look for a property with minimum conditions：Without narrowing the conditions too much, consult a real estate company and ask to be introduced to properties with lower rent
- Choose a property screened by the landlord or management company：Screening may be somewhat less strict than with a guarantee company
What Are the Risks of Using a Rent Guarantee Company?
When using a rent guarantee company, it is also important to understand the following risks.
- Failure to report an incident：If rent delinquency is not reported within the required period, substitute payment may not be provided
- Risk of the guarantee company going bankrupt：If delinquencies become frequent, the guarantee company's financial balance may deteriorate, and the possibility of bankruptcy cannot be ruled out entirely
Frequently Asked Questions (FAQ)
Q. What is the difference between a rent guarantee company and a joint guarantor?
A rent guarantee company covers only the financial side. A joint guarantor, in addition to the financial side, also takes on the role of advising and cautioning the tenant about their lifestyle and behavior.
Q. How much is the guarantee fee?
Initially, it is generally 0.5 to 1 month of rent. At renewal, a fixed fee of about 10,000 yen or a renewal fee equal to 10 to 30% of the rent applies.
Q. What characteristics make someone more likely to fail screening?
People whose income is less than three times the rent, who have a history of rent delinquency, who have negative credit information, or who have negative information online tend to have more difficulty passing screening.
Q. Which guarantee companies are relatively easier to pass?
Independent guarantee companies (フォーシーズ、日本セーフティー, etc.) use their own screening standards and do not check credit information, so they are considered relatively easier to pass.
