Independent legal advice / Mortgagee Certificate / Independent Solicitors Certificate for Loan Documents

If you guarantee a loan for a friend or a family member, the lender may request that you obtain independent legal advice from a legal practitioner to ensure that you completely understand your rights and obligations in relation to the loan agreement.

Independent legal advice / Mortgagee Certificate / Independent Solicitors Certificate for Loan Documents is also recommended if:

The borrower is a company, in which the lender may ask for all the directors to provide the personal guarantee.
The borrower is a company, being a trustee for a Self-Managed-Super-Funds (SMSF) trust, in which the lender may ask for all the members of the trust to seek their own independent legal advice.

Providing a Guarantee carries considerable risks and should not be entered without careful consideration. A risk that could occur is that if the borrower defaults, you would be legally responsible to repay the loan.

When providing legal advice, the solicitor’s certificate verifies to the lender that you have received legal advice in relation to the loan documents and you understand the risks and obligations involved in providing the guarantee.

Many people believe that an independent solicitor’s certificate is simply witnessing your loan documents and signing a single piece of paper. However, this is not the case. In simple words, the lender is leveraging their legal rights by involving the legal practitioners in the transaction, which will further strengthen their case in case of any default. They are shifting their burden on to the legal practitioner, hence the care and cost involved changes more than any other simple stand alone witnessing or attestation.

When providing the Independent Solicitors Certificate, the solicitor must:

Verify your identity

as per the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015, the solicitor must be satisfied with your identity. This is usually completed with 100 points of ID.

Provide Advice regarding your legal obligations

to ensure that you understand what you are entering into and that you understand your legal requirements and consequences in the event of a default.

Keep records of the documents

Being a party to the loan agreement the solicitor must keep records and may be called upon as a witness by the Courts in case of a default.

Further in providing the advice we ensure that:

You understand the difference between a borrower and a guarantor.
You understand what it means to sign the loan documents and advise you of what defaults could arise.
You understand the limitation on your rights.
That the address provided as security is the correct property.

A solicitor will provide you with advice to protect your interests and ensure that you understand that you are making a binding commitment when signing the guarantee documents.

If you are considering becoming a guarantor or are required to seek independent legal advice for your loan documents. We at Sharma Solicitors and Conveyancers have a team of experienced Lawyers who can assist you with your need of Independent legal advice / Mortgagee Certificate / Independent Solicitors Certificate for Loan Documents.