What is “Independent Legal Advice”
So…, you’ve been asked by your lender, solicitor or financial Advisor to obtain “Independent Legal Advice” in connection with a mortgage or guarantee either you or a relative or partner propose to enter into. What does this mean, and why is it required??
- The reason harks back to the 1990's, when in a number of cases that went through our court system parties' argued successfully that they should not be bound by a loan, guarantee agreement or mortgage because they were not aware of, or understand what they were signing up to, and the potential effect on them, or that they were unduly influenced by someone else into signing bank documentation.
- The Courts found favour with these arguments and litigants have been able to escape liability under the loans and guarantees in question.
- The Courts effectively concluded that a mortgage / loan / guarantee may not be enforceable in some cases unless the person signing it is advised by an independent lawyer as to the contents of the document they are asked to sign, and the possible consequences on the person signing, taking into account the person's own situation. Specifically, the courts ruled that, in order to rely on a loan / guarantee, the lender is under a duty of care to ensure that the person signing receives independent legal advice at a face to face meeting from a solicitor, advising them in respect of the document they propose to sign.
- In taking advice (known as “independent Legal Advice”) from a solicitor, the people signing up to the loans, guarantees and other such documents were no longer able to avoid liability by claiming they were unaware of the consequences or were pressured into doing so.
- As a result, most banks, building society's and other lenders require people signing some types of guarantee and other mortgage documentation to see a solicitor to obtain independent legal advice before the loan can be concluded.
When do I need to take Independent Legal Advice?
Banks and other lending institutions generally require people to take Independent Legal Advice (ILA) in the following situations, although note that this is not a comprehensive list:-
- Where you live at a Property, or intend to do so, as an adult occupier who is not listed as a borrower on the mortgage. The lender will require you to sign a form confirming that you will vacate the Property if they repossess, and waiving any financial interest you may have in the mortgaged Property. Different lenders have different names for the forms they want signed, but these forms are often known as “Occupier's Waiver” or “Deed of Consent" or "Deed of Postponement".
- Where you are a director in a Company acting as a guarantor for the Company’s borrowing. For example where the company takes a loan or obtains an overdraft and where you as director are required to stand as guarantor for that borrowing.
- Where you act as guarantor for any other loan or mortgage
- Where a bank lends money by way of mortgage to a borrower who is not going to be an owner of the subject Property;
- 3rd Party Legal Mortgages (where the Borrower is not the same person as the person offering the lender security) and the Company or LLP proposes to borrow money for which you will be liable
- “Springboard” Mortgages
- In some circumstances, where you propose to make a large gift
- Employment Settlement Agreements
- For loans on onerous terms
How much does it cost to obtain Independent Legal Advice?
Unfortunately, there is no single answer to this as it depends on factors like:-
- Where you live
- What you require Independent Legal Advice for
However, by contacting us at ILA-Connect you will be benefittng from our knowledge of the solicitors in your area to provide a competitive quotation for a firm local to you.
Why have the solicitors I have spoken to declined to provide me with the Independent Legal Advice I need?
Going back a few years, it was relatively easy to obtain Independent Legal Advice where it was required. However, several recent cases have been brought where solicitors providing Independent Legal Advice have been found to have done so inadequately, and have ended up bearing liability for the debts that were the subject of the Independent Legal Advice.
As a result, these days, many solicitors will decline requests to provide Independent Legal Advice, on the basis that it is “high risk and low reward”. In addition many solicitors’ Professional Indemnity Insurance policies prevent them from giving Independent Legal Advice.
Here at ILA-Connect we have worked hard to identify solicitors in your area that provide this service, and to compare their prices, such that we are able to refer you easily and quickly to someone that will carry out the work economically. This is so you find someone to provide the service, promptly, and that you are not overcharged.
How long does it take to obtain Independent Legal Advice?
This obviously depends on your circumstances and where you live, but we can usually refer you to a local solicitor offering this service within 24 hours. Your appointment will usually be within 3 working days or less thereafter. Your solicitor should then be able to confirm to your lender that the Independent Legal Advice has been given within 48 hours. Barring any other obstacles, you will then be ready to complete your transaction.
Can I waive the requirement for Independent Legal Advice?
The short answer is no, if you want to satisfy the lender's requirement and allow the transaction to proceed.
You can refuse to take this step, but in all likelihood, your lender will simply refuse to proceed unless you comply with its requirements.
What is the cost of Independent Legal Advice?
The amount will depend on your particular location, the type of independent legal advice and on other factors, such as whether the advice is to be provided via online web conferencing software e.g. Skype, or at a meeting at the solicitor's offices. At ILA-Connect, you can get a free obligation quote.