An independent legal certificate is a document used in a financing transaction where an individual is guaranteeing a loan. When a lender requires an individual to obtain independent legal advice, an independent legal certificate is precedent to advancing the required funds.
Directors of Limited Companies are often asked by Banks to sign personal guarantees to underwrite the company liability. An example of a situation requiring an independent legal certificate is when Landlords create a Limited Company, through which they purchase property. The Bank provides mortgage funds to the Company, but only if the landlord/director(s) give a personal guarantee.
Independent legal certificates can also be used for overdrafts and other business loans. The Bank requires that the personal guarantee is reviewed and that you are given advice on it, by an independent solicitor.
The purpose of using an independent solicitor
Your lender will usually require the Independent Legal Advice to be provided by a solicitor in a different firm to the one doing the underlying transactional work i.e. the property purchase. Lenders require you to obtain Independent legal advice to ensure that you have a full and frank understanding of the risks and obligations associated with taking on a loan, mortgage or other facility. You will not then be able to claim that you didn’t understand what you were signing if there is a dispute in future. Without a completed certificate of legal advice, the parties may find it difficult to enforce elements of the agreement.
To this end, I am a truly independent solicitor, and therefore am able to provide independent legal advice to you.
Other reasons to seek an independent solicitor
Independent legal advice is a mandatory requirement during a transaction where a party is placed at risk but doesn’t get a direct benefit from. The advice is provided by a solicitor who is independent to the transaction.
The most common transactions requiring independent advice from a solicitor are:
- Occupier Waiver
- Personal Guarantees
- Property Settlement Agreements
- Employee Settlement Agreements
- Director Mortgage Guarantee
- Transfer of Equity
Why do you need independent legal advice?
It is important to note that all legal advice should be independent. You might need further independent advice when you are completing a joint transaction, and you both want the same transaction to complete. However, there may be potentially conflicting interests that need further explanation in order to help you fully understand the implications on you individually when the transaction completes.
Does independent legal advice have to be face to face?
As part of an independent solicitor’s job is to check that the party getting the legal advice is doing so without undue influence and as such are not misled, they must:
- compare the person they are speaking to the photo ID
- ensure the person is on their own and not being influenced
Independent legal advice can be obtained either face to face or via video conferencing software.
How much does independent legal advice cost?
Typically, an example of fees involved in providing independent legal advice that is per director per loan are £500 plus VAT . These days, we can usually deal with it by Zoom, but face to face meetings can be arranged at a small additional venue cost.
Next steps
I understand that obtaining independent legal advice is often time-sensitive and critical. With this in mind I offer you a dedicated independent legal advice service, a quick turnaround and where possible, fixed fees.
If you need advice on any factor regarding obtaining independent legal advice in view of obtaining a certificate, please get in touch.