Independent Solicitors Certificate
If you are required to enter a Guarantee or Guarantee and Indemnity you need a solicitors certificate.
Independent Advice Certificate
Independent Solicitors Certificate of Independent Legal Advice
It is becoming increasingly common for banks and other lenders to require borrowers or guarantors to obtain independent legal advice about their rights and obligations. Generally, these lenders will require that the solicitor providing the advice gives the lender an Independent Advice Certificate which certifies certain things.
Solicitor Guarantee Certificate
We are able to advise on your loan guarantee,
and provide you with solicitor’s certificates
Why has the bank asked you to get a solicitor's certificate?
Responsible lenders following ASIC responsible lending guidelines will require that a solicitor provide a Solicitor Guarantee Certificate of independent legal advice to confirm that the Guarantor fully understands the legal consequences of giving such a Guarantee.
Many people consider that they understand their obligations as a borrower or a guarantor, and become frustrated by this increasingly common requirement. There are a number of cases in Australia that have resulted in loans and guarantees being set aside due to borrowers and/or guarantors failing to understand the consequences of the transaction.
Following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry it is likely that lenders’ requirements in this area will only increase.
If you require a solicitors certificate you will need to:
1. Provide the guarantee documents at least 48 hours prior to the meeting with a solicitor.
2. Make a list of questions for the solicitor.
3. Meet with the solicitor for at least one hour.
The solicitor will explain the obligations and possible outcomes of a default under the facility being guaranteed.
4. Ask your questions at the end of the meeting.
“It therefore stands as a warning to mortgagees, mortgagors, their solicitors and the finance industry generally about the importance of the provision of proper and independence advice to mortgagors contemplating the execution of a mortgage. The provision of the certificate of explanation is not a charade or a formality. To it attach important legal and professional consequences.” In Fraser v The Council of the Law Society of New South Wales [1992] NSWLST 6 President Kirby
What type of things needs to be certified?
Depending on the lender, Independent Advice Certificates generally require that the solicitor certify that they have:
- Explained the nature and effect of the relevant documents to the borrower or guarantor (as the case may be);
- Advised the borrower or guarantor that they should carefully consider the financial risks of entering into the transaction, or providing the guarantee (as the case may be);
- Advised the borrower or guarantor to make appropriate enquiries about things like the risks involved in the loan or guarantee (as the case may be) and the adequacy of any security being given by the borrower or others;
- Asked and received confirmation from the borrower or guarantor that they had read the relevant documents and understood their general nature and effect, the solicitor’s advice and that they were entering into the transaction freely, voluntarily and without pressure.
Some common situations where a Solicitor Guarantee Certificate / independent legal advice is needed are:
Parents providing a Guarantee for a child’s home loan
Home Loan Guarantee
Where the borrower is contributing less than 20% of property value
Husband/Wife or de -facto guaranteeing the debt of their partner
Loans to Family Trusts
Note: We do not give financial advice. Before entering this document you should consider your personal financial circumstance and consult an accountant or financial adviser.
Note: We are NOT advising on:
- The viability of the transaction; or
- The borrower’s ability to make repayments; or
- The Guarantor’s ability to make payments.
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Independent Solicitors Certificate
FAQ - Frequently Asked Questions
After the Amadio case in 1983, the major banks became nervous that Guarantor parents could get out of the Guarantee by saying that they didn’t understand.
Similar cases occurred when wives signed Guarantees for their husbands benefit without properly understanding the implications. See Garcia v National Australia Bank in 1998 where again, the bank was unable to enforce the Guarantee given by the wife.
The banks response to the Amadio and Garcia cases was to require Guarantors obtain a Certificate of independent legal advice so that the banks were protected.
We need all the documents 2 business days prior, not just the ones you will be asked to sign. It is cheaper and faster if your bank or broker emails them to us. You can retain your set. The full list will usually include:
- the loan offer and its terms and condition;
- the Mortgage and its terms and conditions;
- the Guarantee;
- the “Things to know about Guarantees” plain English FAQ document which is part of the National Credit Code;
- disclosure documents, including the loan application, other credit applications, and credit records such as overdrawns and dishonours.
Because we want to properly understand the nature of the agreement so that we can prepare ahead of the meeting with us. That allows us to spend our time with you giving advice and not reading the documents. While we are very familiar with most of the lenders standard set of documents, from time to time there are changes and mistakes made.
Also, if we have the documents we know that you have received them. The Amadio parents received no documents, so by asking for them we can ensure that you have received them.
In the case of complex loans for SMSF and Trusts we always draw a mud map of the structure of the loan prior to ensure everyone understands. This requires we have the documents prior.
Because it includes significant risk and complexity that must be properly considered prior to any advise that which the client my choose to enter or not enter the transaction. It is about the advise and not only a witnessing a signature.
Because we will not give legal advice to you unless you have been given the opportunity to read them first.
That said, we strongly recommend that prior to coming in that you read at least:
- the “Things to know about Guarantees” plain English FAQ document;
- the Amadio case Wikipedia page;
- the MoneySmart fact sheet “Love and Loans”;
- the banks loan offer.
We will ensure that you have copies of these documents prior to our meeting as well as a copy of our checklist we will work through at the meeting.
Yes. It is always a good idea to get independent legal advice before taking on liability for anther persons loan, a third party guarantor loans, a family pledge loan or a security support loan.
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