Legal Definitions - accommodation surety

An accommodation surety is an individual or entity who agrees to be responsible for the debt or obligation of another person (known as the "principal debtor") if that person fails to meet their commitment. The defining characteristic of an accommodation surety is that they provide this guarantee primarily to help the principal debtor obtain credit, a loan, or fulfill a contractual requirement, without receiving any direct financial benefit or compensation for taking on the role of guarantor themselves. They are essentially lending their creditworthiness or good reputation to "accommodate" the principal debtor.

• Example 1: Co-signing a Student Loan

  A recent college graduate, Sarah, needs a loan to pursue a specialized master's degree. Her credit history is still developing, so the bank requires a co-signer to approve the loan. Her aunt, Maria, agrees to co-sign the loan agreement.

  In this scenario, Maria is the accommodation surety. She is not receiving the education or directly benefiting from the loan proceeds. Her role is solely to lend her creditworthiness to help Sarah secure the necessary funds. If Sarah defaults on the loan, Maria will be legally responsible for its repayment.

• Example 2: Guaranteeing a Small Business Loan

  David wants to open a small, independent coffee shop but has limited business assets and a short credit history. A local bank is hesitant to approve his business loan without additional security. His long-time friend, Mark, believes in David's entrepreneurial vision and agrees to personally guarantee the business loan.

  Mark acts as an accommodation surety. He is not an owner or partner in David's coffee shop, nor does he receive any direct payment for guaranteeing the loan. His guarantee is provided to "accommodate" David, enabling him to obtain the financing needed to start his business. Should the coffee shop fail to repay the loan, Mark would be legally obligated to cover the debt.

• Example 3: Guarantor for an Apartment Lease

  Emily, a college student, wants to rent her first apartment. The landlord requires a guarantor because Emily has no prior rental history and a limited income. Her father, Mr. Henderson, signs the lease agreement as a guarantor.

  Mr. Henderson is the accommodation surety. He will not be living in the apartment or directly benefiting from Emily's tenancy. His signature on the lease serves to assure the landlord that if Emily fails to pay rent or causes damages, he will be responsible for those financial obligations, thereby accommodating Emily's ability to rent the apartment.