What is an Independent Legal Advice Certificate?
Also known as a guarantor advice certificate, or a legal advice certificate, an Independent Solicitor’s Certificate is often required by a Lender or Bank to confirm that a borrower or guarantor to a loan has received independent legal advice and understands the risks and potential liabilities involved in being a third-party guarantor to someone’s financial lending and signing security documents.
Some common examples of when this may be required are:
- if a company is obtaining a loan, but the bank requires personal guarantees from the directors of the company, they may require those directors to seek independent legal advice and a certificate prior to signing any security documents;
- when parents are providing a guarantee to their child’s loan;
- you are the trustee of a trust that is obtaining a loan.
By requiring a guarantor to obtain independent legal advice (or guarantee and indemnity advice) and sign a declaration confirming they have obtained such advice, it reduces the bank’s risk as to there being any argument that a guarantor may not have understood the documents they were signing.
Banks will often represent that the security documents are straight forward and that it is just a matter of going and getting some documents ‘signed’. It is sometimes even assumed by clients that they only need a Solicitor to witness their signature on the security documents. This is not the case and there is more required by a Solicitor than merely signing a document.
What kind of advice does the Solicitor have to provide?
Prior to signing a certificate, it is a Solicitor’s responsibility to review the security documents and provide you (the guarantor) with general advice as to the general nature and effect of the documents, your responsibilities, and potential risks and legal consequences associated with signing them.
Although you may have a good understanding of what being a guarantor is, or have even provided a guarantee previously, if the lender has required you to obtain a certificate, we must still provide you with the same advice as someone who may have no understanding. Some lenders may waive the requirement if they know you and you have provided similar guarantees and indemnities in the past, but this will completely depend on the lender and their policies.
A solicitor cannot provide any financial advice such as on the viability of the transaction that the borrower is undertaking, so we recommend you obtain independent financial/accounting advice prior to signing security documents. Some lenders even require you to receive financial advice and have a certificate signed by a financial adviser.
What is the process for having a Solicitor’s Certificate signed at FC Lawyers?
You will need to provide us with the documents that the bank has provided to you by the Lender so that we may review them. These documents may include a Deed of Guarantee and Indemnity or even a mortgage on your property as additional security for your guarantee. Documents vary between each Lender, so we must be provided with the documents prior to the appointment to ensure the appropriate advice can be provided to you.
You will need to meet with us in person once we have reviewed the documents and ensure you bring your photo IDs so that we can verify that you are who you say you are. The borrower or any other person cannot be present when we provide such advice, as the advice needs to be independent so that we are satisfied you are not being forced or influenced to sign anything. At the meeting, we will provide you with the necessary advice as to the nature of the documents are and the effect of signing such documents. If you are then happy to sign the documents, we will assist with this process, and some documents will require a solicitor to witness your signature.
If you receive guarantee and indemnity documents and require a Solicitor’s Certificate, it is important to contact us and arrange an appointment quickly, as we will require time to review such documents and organise a suitable time for an appointment. Delays with getting such documents signed and then returned to the bank can cause delays with the loan. For example, if the guarantee is being provided for a borrower’s loan to purchase a property, the bank will not be ready for settlement until they have received all loan and security documents and have reviewed them all, so it is best to not leave it until the last minute.
How much does it cost?
The cost will depend on multiple factors, such as the extent of the documentation provided, the complexity of your financial structure and whether there are multiple guarantors.
We will be able to provide you with a quote as to our professional costs once the documents have been provided to us and we have an idea of what is required.
If you are required to obtain guarantee and indemnity advice, or have a Solicitor’s Certificate signed, please contact FC Lawyers to assist.
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