When is Independent Legal Advice (ILA) required?

Your solicitor acting for you in your transaction will always advise when  ILA is often required, usually it is in the following circumstances:

• 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. As the registered proprietor is not a borrower, they would have no control over the borrower fulfilling their obligations to the lender.  For instance, this is often  required when a son or daughter wants to take a loan and asks their parents to provide the guarantee using their own home as security.  Another instance is where a Director of a Company wants to arrange a loan and the Legal Charges will be applied to property where the other Directors of the Company are the registered proprietors. The registered proprietor of the property 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.

• Joint Borrower, Sole Proprietor Mortgages – sometimes individuals have difficulties in securing the finance they need to purchase a property, for instance if a son or daughter want to purchase a property and ask one or both of their parents to act as a second borrower to secure the loan. Although the mortgage is supported by the second borrower, the second borrower 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).
• Personal Guarantees (“PG”) – it is often a requirement of a lender to enter into a personal guarantee with to provide additional security for the lender should the loan be defaulted.  Directors or shareholders of corporate borrowers are required to enter into a PG with the lender to secure the loan. The individual entering into the PG would need ILA to ensure they understand the risks and liabilities that they are taking on. Often a loan in these circumstances is secured against property or other tangible assets.
• Unregulated Loans – where a company or individual enters into a third party loan with a company, whereby the terms are outside of the normal regulations and protections afforded by statute and the Financial Conduct Authority, they usually will be required to take ILA given the onerous conditions of the Loan before they are allowed to proceed with the transaction to advise them of the risks and disadvantages of this before signing.

• 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 and the adult occupier would vacate the property if the lender initiated possession proceedings.

• Transfer of Equity – this involves the removal of a registered proprietor from the title.  This sometimes happens when there are two registered proprietors who have been living together or have owned the property through their business.  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 involved with ILA?

• You will need to attend a meeting with Mr Thompson or your appointed solicitor in person and they will need to verify your identification documents.

• Your solicitor will deliver their advice to you and go through the transaction documents.

• Your solicitor will review the relevant documents and complete these with you.

• You will have 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 (if required) confirming you have received the ILA. You may also have to sign the same or a similar certificate if required as each lender has their own individual requirements.

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

Our Costs

The cost of our appointment to obtain independent legal advice is £250.00 + VAT (at the rate of 20 percent) per person and per transaction.

For example if a company with two directors is purchasing two properties, each director would require two Independent Legal Advice sessions (one for each property) meaning four sessions are required at £250.00 + VAT (at the rate of 20 percent) per person and per transaction (in total £1,000 + VAT at the rate of 20 percent).

If you require ILA or any further information and guidance, please contact Hannays Solicitors on 0191 497460 or 0191 4555361 or by email at info@hannayslaw.co.uk  and we will be pleased to help you.