across the bar

staying with suretyships

by Steve - Posted 13 October 2008

First prize when getting suretyships signed is to get the surety to register a surety bond over their home. Unfortunately most sureties will not agree to this so  you need to make sure they offer something else in the way of reassuring you that if you have to call upon them to pay, they are able to do so. Make sure the surety is a person of means with assets or income sufficient to satisfy the maximum exposure you may have. 

More importantly, make sure the suretyship document contains the following provisions:

1. the person signing the suretyship binds thems as a surety and co-principal debtor with the main debtor. 

2. an obligation on the surety to provide you with information on their financial position (including list of assets and liabilities) at regular intervals; and

3. your right, as the creditor, to call the suretyship up if the surety's financial position deteriorates (even if the principal debtor is not in default)

4. confirmation that the surety remains liable for any debt incurred before the suretyship is terminated.