Independent Legal Advice

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What is Independent Legal Advice?

Independent Legal Advice (“ILA”) is legal advice delivered by an independent solicitor who is not connected to the transaction in any way.

The solicitor delivering the advice must be independent from the transaction to avoid any conflicts of interest arising and to ensure the individual is fully informed and comfortable before proceeding. A solicitor acting for all parties would find it difficult to act in the best interests of everyone individually.

When would I need ILA?

ILA is often required in the following circumstances:

• Personal Guarantees (“PG”) – it is increasingly becoming a standard requirement of lenders for directors or shareholders of corporate borrowers to enter into a PG with them. The purpose of this is to provide additional security to the lender where the borrower defaults on their obligations. The individual entering into the PG would need ILA to ensure they understand the risks and liabilities that they are taking on.

• Third Party Legal Charges – this is where a Legal Charge is being secured against a property where the borrower is not the registered proprietor of that property. The registered proprietor would need ILA to understand that if the borrower defaults on their obligations to the lender, the lender would be entitled to enforce their security against the property which could include repossession of the property. As the registered proprietor is not a borrower, they would have no control over the borrower fulfilling their obligations to the lender.      

• Joint Borrower, Sole Proprietor Mortgages – individuals can have difficulties in securing the finance they need to purchase a property on their own and so the mortgage can be supported by a second borrower who will not be a registered owner of the property. This second borrower would still be bound by all of the borrower obligations contained in the legal charge, including repayment of the loan, but they would not receive any benefit of doing so (i.e. ownership of the property).

• Occupiers Waiver – if a property is to be occupied by an adult occupier (i.e. someone over the age of 17), the occupier can acquire potential rights. A lender may require the occupier to sign a waiver relinquishing these rights and to confirm that they would vacate the property if the lender initiated possession proceedings. 

• Transfer of Equity – this involves the removal of a registered proprietor from the title. ILA may be needed to ensure the person transferring their interest out of the property understands that they will no longer have legal title to that property.

What is the benefit of ILA?

ILA is required to ensure that the individual entering into the relevant document is fully aware of the risks and implications of proceeding with the transaction and that they are making an informed decision. It is also an opportunity to ask the ILA solicitor any questions so that the individual is fully informed before signing the relevant document.

If ILA is not obtained, the documents entered into could be considered unenforceable in a dispute and therefore, to remove this uncertainty, often lenders make obtaining ILA a compulsorily requirement.

What is involved with ILA?

• Your solicitor will review the relevant documents and prepare a letter of advice for you.

• You will need to attend a meeting with your solicitor either virtually or in person (depending on the lender’s requirements) and the solicitor will need to verify your identification documents.

• Your solicitor will deliver their advice to you and go through the transaction documents. This is the opportunity to ask any questions you may have.

• If you are happy to proceed, you will sign the documents and the solicitor will act as your witness. Your solicitor will sign a certificate confirming you have received the ILA. You may also have to sign a similar certificate.

• If you do not wish to proceed to signing after receiving the advice, the solicitor will inform the relevant parties.

Summary

If you require ILA or for any further information and guidance, please contact BHW on 0116 289 7000.