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With a suretyship agreement, a third party provides the creditor with additional security: if the debtor is unable to pay, the creditor holds the guarantor liable. It is a widely used instrument, for example, when a landlord seeks security from a young company without a track record.
What is a suretyship?
In the case of suretyship (Article 7:850 of the Dutch Civil Code), a third party—the surety—undertakes to satisfy the debt to the creditor if the principal debtor fails to do so. For example, a landlord renting to a start-up company may request that a director or parent company act as guarantor. In this way, the creditor reduces their risk of non-payment.
The guarantor stands behind the debtor
Suretyship is accessory: the surety is only entitled to payment if the principal debtor defaults, and only for what the debtor owes. In principle, the surety can raise the same defenses as the principal debtor. If the surety pays, he can in principle recover the amount paid from the debtor.
Extra protection for the private guarantor
If a private individual acts as guarantor outside of their profession or business, additional protection applies: a maximum amount is often required, and the consent of the spouse or partner is necessary (Article 1:88 of the Dutch Civil Code). If such consent is lacking, the guarantee may be annulled. Keep this in mind to avoid surprises.
Document the guarantee properly
Record in writing for which obligations, up to what amount, and under what conditions the guarantor is responsible. A clear guarantee agreement prevents disputes and ensures that the security actually holds up.
Frequently Asked Questions
What is the difference between guarantor and principal debtor?
The surety is only liable if the principal debtor fails to pay, and only for the latter's debt. Suretyship is therefore additional security.
Does a private guarantor offer extra protection?
Yes: often a maximum amount and the required consent of the spouse or partner. Without that consent, the guarantee may be voidable.
Can the depositor get the amount paid back?
In principle, yes: the guarantor who pays can recover the amount from the principal debtor.
Arranging a guarantee properly?
Our legal experts draft watertight guarantee or loan agreements or review lease agreements. View our financial lawteam or schedule a free consultation.
