Understanding guarantorship and property ownership
In many financial transactions, especially in loan agreements, the term “guarantor” is commonly used. It plays a critical role in how credit is accessed, secured, and repaid. On the other hand, property ownership involves legal and documented rights to land or buildings. While these two concepts are different, they often intersect when it comes to financing, lending, and security of assets. Understanding both is important, particularly for individuals involved in loans, real estate, or legal agreements. Below we explore guarantorship and property ownership.
A guarantor is a person who agrees to take responsibility for someone else’s debt or obligation in case they fail to meet their terms of agreement. In most cases, this happens when someone applies for a loan but does not meet all the requirements—especially regarding income or creditworthiness. The guarantor steps in to provide extra security to the lender by assuring them that the loan will be repaid, even if the borrower is unable to do so.
Guarantors are common in personal loans, SACCO loans, mortgages, and even rental agreements. The guarantor must have a stable financial background and, in many cases, must not have other financial obligations that may affect their ability to repay the loan if required. Once they sign the agreement, they are legally bound to cover the loan or obligation if the borrower defaults.
Guarantors and Property as Security
In some cases, especially with large loans, a guarantor may offer property as collateral. This is a critical point where guarantorship and property ownership overlap. When property is used as security, the ownership of that asset must be clearly verified. The title deed or ownership document must be clean and must show that the guarantor has the right to use it as a guarantee.
Some lenders may even place a legal charge on the property, meaning the property cannot be sold or transferred until the loan is repaid. This is particularly common in real estate transactions or large-scale business loans. If the borrower fails to repay, the lender may have the legal right to sell the property to recover the loan amount.
Implications for Property Owners Who Act as Guarantors
If you own property and agree to be a guarantor, it’s important to understand the risks. You are not just making a promise; you are potentially putting your asset at risk. If the borrower fails to pay, and you are unable to cover the debt yourself, the lender may pursue legal action to recover the loan through your property.
That’s why it is recommended that any person offering to guarantee a loan involving property should seek legal advice. They should also request a copy of the loan agreement, understand the repayment plan, and verify whether their property is being listed as collateral or not.
Guarantorship Does Not Equal Property Ownership
It is essential to note that being a guarantor for someone does not make you a co-owner of their property or loan. You are not entitled to any benefit from the loan or the asset unless specified otherwise in the agreement. Your role is purely to offer financial backing. Similarly, if someone uses their property as a guarantee for your loan, it does not mean you own that property.
Clear documentation is important to avoid disputes or misunderstandings. If property is involved in any guarantee, all the parties—including the borrower, guarantor, and lender—should sign a written agreement detailing the terms of the guarantee.
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com
