What is independent legal advice?

This advice is required if you enter into certain legal agreements where you assume a risk or liability. It is usually a requirement from a lender.

The advice has to be impartial and given by an independent solicitor without any conflict or duty of interest. The advice must be given in your best interests, so the solicitor will need to be clear about all risks and benefits involved in the transaction.

When is independent legal advice required?

It is generally required by a lender where you are taking on a risk without a direct benefit to you. Types of legal agreements where a lender might require this advice to be given include:

– Joint mortgage sole proprietor: mortgages where two or more people are responsible for a mortgage but only one has legal title to the property. This is often used for parents helping their children to get on the property ladder.

– Director’s personal guarantee: where a director agrees to be personally liable for a mortgage in the event the company defaults.

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– Occupier waivers: lenders may require adult occupiers not named on the mortgage to waive any right to live in the property in the event of a repossession.

– Deeds of trust: legal agreements between co-owners of property about how to arrange ownership and finances in relation to that property.

– Second charge: where a mortgage or second charge is taken out against a property and the money is used for something one or more owners will not benefit from.

Why do I need to get this advice?

The advice protects both you and the lender. It ensures that you are aware of all the risks and benefits involved in the transaction. It also stops you being taken advantage of by other parties to the transaction, even if that is unintentional. The situations where the advice is required often involve close family members, so the advice protects you from undue influence.

The lender is also protected because if you later try to claim that you were not aware of a risk, the lender will be able to show that you decided to proceed after receiving advice on that risk. Your solicitor should explain this to you when giving the advice. Who can give the advice?

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The advice has to be given by a practising solicitor. The solicitor must be independent; they cannot be instructed by or working for any of the other parties to the transaction, or have any other significant ties or owe any duties to them. The solicitor cannot stand to benefit from the transaction they are advising on (except for their fee for the advice).

Some solicitors will not provide advice to clients in this situation because they perceive the work to be high risk. Lawyers at specialist conveyancing and property companies such as Sam Conveyancing are more willing to provide the advice.

How should the advice be used?

The advice is not simply a ‘tick box’ exercise. You should consider the advice carefully and use it to decide whether to go ahead with the transaction. The lawyer does not make the decision for you but gives you the information needed to make a decision. They will give you a letter to provide to the lender to prove the advice was given.

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