Joint Guarantors vs. Guarantor Companies: A Complete Guide to Rental Guarantee Systems
There are two types of guarantees for rental leases: joint guarantors and guarantor companies. We'll explain in detail how each works, their advantages and disadvantages, and how to choose the right option.
When entering into a rental lease agreement, rent guarantee is almost always required. Landlords and property management companies require some form of guarantee to protect themselves in case the tenant becomes unable to pay rent. There are two main types of guarantees: joint guarantors and guarantor companies (also called rent guarantee companies), with guarantor companies becoming increasingly mainstream in recent years. If you don't properly understand how each system works before signing, it can lead to trouble down the line. In this article, as a professional in rental real estate, I'll explain the mechanisms, differences, advantages, and disadvantages of both options in an easy-to-understand way.
What Is a Joint Guarantor?
A joint guarantor is a person who assumes the obligation to pay rent on behalf of the tenant (the principal debtor) if the tenant becomes unable to pay. It's most common for family members (such as parents or siblings) to serve as joint guarantors.
A joint guarantor has two main obligations. First, if the tenant fails to pay rent, the guarantor can be directly billed by the landlord and must pay on the tenant's behalf. Second, the guarantor may also be liable for restoration to original condition costs or damages if the tenant cannot pay them after moving out.
What requires particular attention is that joint guarantors are not granted the right of notice (the right to request that the landlord first bill the tenant) or the right of exhaustion (the right to request that the landlord first pursue the tenant's assets). Landlords are legally permitted to demand payment directly from the joint guarantor before pursuing the tenant, making this a heavier obligation than that of an ordinary guarantor.
Changes from the Civil Code Revision (April 2020)
Under the Civil Code revisions that took effect in April 2020, rental lease agreements must specify a "maximum guaranteed amount" (the upper limit of the guarantor's obligation) in writing. Joint guarantor agreements without a stated maximum guaranteed amount are invalid. Typically, the maximum guaranteed amount is set to roughly 12 to 24 months' rent, though this varies by property and property management company. Always confirm that the maximum guaranteed amount is clearly stated in your lease agreement.
What Is a Guarantor Company?
A guarantor company is a private company that provides a service to pay rent on behalf of the tenant (called "assumption of payment") when the tenant defaults on rent. The tenant pays a guarantee fee to the guarantor company. These services became popular as societal changes—such as the decline of extended families and the increase in single-person households—made it harder for tenants to secure a family member as a joint guarantor.
Typical Guarantor Company Fees
The initial guarantee fee typically ranges from 0.5 to 1 month's rent. After that, with each lease renewal, an annual guarantee fee of around ¥10,000 or a percentage of the monthly rent is generally charged. When selecting a property, be sure to confirm the total cost including the guarantee fee by referring to How to Break Down Initial Costs and Save Money.
Credit Card-Affiliated vs. Independent Guarantor Companies
There are two main types of guarantor companies: credit-affiliated and independent. Credit-affiliated companies (such as Orico Forent Insure and Jacks) check credit information agencies (CIC and JICC), so if you have a history of credit card delays or overdue mobile phone payments, the approval process may be more stringent. Independent guarantor companies (such as Four Cs and Epos Room) do not check credit information and have relatively lenient approval standards. They tend to be more accessible to foreign nationals and those with past financial issues, but approval standards and fees vary by company, so it's important to confirm details in advance.
Joint Guarantor or Guarantor Company: Which Should You Choose?
In recent years, properties requiring a guarantor company but not a joint guarantor have become the mainstream. It's most common for property managers or landlords to specify which guarantor company to use, though some properties may require both a guarantor company and a joint guarantor.
Benefits of Using Only a Guarantor Company
You don't need to ask a family member to be a guarantor, avoiding the associated hassle and emotional burden—which is particularly helpful for those without family support nearby or who are hesitant to ask relatives for this favor.
Benefits of Having a Joint Guarantor
Some properties don't require the initial guarantor company fee (typically several tens of thousands of yen). Also, if you're concerned about guarantor company approval, having a family member serve as a joint guarantor can sometimes make the approval process easier.
Difference Between Emergency Contact and Joint Guarantor
Lease agreements often request an "emergency contact (family member)," but this is different from a joint guarantor and does not carry legal guarantee obligations. Signing the "emergency contact" field does not make you responsible for rent payments, but always confirm your role before signing.
Common Issues with Guarantee Agreements and How to Handle Them
If Rent Default Occurs
When rent defaults, the guarantor company will contact the tenant by phone and in writing. If payment is temporarily difficult, it's important to contact the guarantor company or property manager early to discuss payment plans or extensions. If defaults are left unaddressed, the guarantor company will make an assumption of payment and then seek reimbursement from the tenant. If the default continues long-term, the lease can be terminated and the tenant may face eviction.
What to Confirm Before Becoming a Joint Guarantor
Always confirm three things: the maximum guaranteed amount, the property's rent and lease term, and the process for changing the guarantor if needed. The maximum guaranteed amount can sometimes be set at several million yen, so it's crucial to fully understand the risk you're taking on before agreeing.
Summary — Resolve All Questions Before Signing
Rental lease guarantee systems are legal agreements that affect the tenant, the guarantor, and the landlord. Before signing the lease, always confirm the type of guarantee, the maximum guaranteed amount, the breakdown of guarantee fees, and the role of the emergency contact. Reading Tips for Passing Rental Application Screening will also help you better understand how the approval process works and how guarantor companies fit into it. If you have any questions, don't hesitate to ask your real estate agent, and signing only after you fully understand the agreement is the best way to prevent trouble down the road.
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