Independent Legal Advice for Property Transactions
In a legal transaction, where one party faces risks without gaining clear benefits, it’s important to seek advice from an independent solicitor.
If you’re buying a property with a mortgage, you’ll likely need to get an Independent Legal Advice Certificate to prove you’ve received advice. This is because getting a mortgage involves significant legal and financial responsibilities. As the borrower, you’re taking on the risk of repaying a large loan over a lengthy period, and, failing to meet the mortgage terms could lead to serious consequences.
This is often a regulatory requirement or standard practice used by mortgage companies to ensure compliance with legal and ethical standards.
At Lawhive, we’re dedicated to offering quick and affordable independent legal advice to everyone in the UK, as and when they need it, regardless of location.
To find out more and connect with our network of experienced UK conveyancers and lawyers, contact our Legal Assessment Team today.
Why do I need to get independent legal advice?
You need to get independent legal advice so you fully understand the implications of a joint transaction, especially when there may be conflicting interests involved. This helps you make informed decisions and protects your interests.
Conflicting interests refer to situations where the parties involved in a transaction have different goals or priorities.
In the context of getting a mortgage, conflicting interests may arise between the borrower and the lender. For example, the borrower’s interest is to secure the loan to purchase a property, while the lender’s interest is to mitigate the risk of default and ensure repayment.
Therefore, banks have a legal duty to make sure those applying for a mortgage or loan get independent legal advice from a solicitor.
What counts as independent legal advice?
Independent legal advice means meeting with a solicitor who isn't involved in your transaction. Their job is to help you understand the risks and terms involved so you can make informed decisions.
To do this, you arrange a meeting with a solicitor and send them your documents for review. You'll also need to verify your identity.
With Lawhive, this process happens securely through our platform, through which you can also message your solicitor and schedule a meeting, so everything happens in one place.
During the meeting, which can be done over the phone or via video call, they'll explain the transaction's ins and outs and highlight any risks. Independent Legal Advice should cover:
Explaining the documents and the risks involved, such as losing the home or facing bankruptcy if payments are missed.
Assessing the seriousness of the risks based on the mortgage’s purpose, amount, and terms, making sure you understand the property’s value and any other assets for repayment.
Notifying you that the lender may change the loan terms without consulting them.
Giving you the option to request negotiation with the bank on transaction terms.
Your solicitor will also check you know you have the sole authority to sign and agree to the mortgage or guarantee, without any pressure or influence.
After the meeting, you'll receive an Independent Legal Advice Certificate. Sometimes, this is sent directly to your conveyancer or solicitor handling the transaction for ease.
It’s important to note that independent legal advice is not legal representation. This process is to make sure you understand the risks involved in the transaction. It doesn’t determine whether the agreement is fair.
When do you need to get independent legal advice?
Common scenarios where you may need to seek independent legal advice include
Transaction | Explanation |
Personal or director’s guarantee for a loan or mortgage | Often used by business owners to secure property purchases. It involves making a personal guarantee for the loan, which also notifies other directors of their liability. |
Joint borrower or sole proprietor mortgage | This is when family members help others onto the property ladder by offering their mortgage as security for someone else’s loan. |
Waiving rights in a property subject to a mortgage | This is when individuals sign an occupiers’ waiver form to live at a property without owning it. Typically, this transaction involves adult children or relatives agreeing not to interfere with the lender’s right to repossess if payments aren’t made. |
Deed of Trust | A Deed of Trust is used by joint tenants who want to outline specific terms of their agreement. In some cases, one beneficiary may get independent legal advice to better understand the terms and how they may affect them in the future. |
Transferring equity between properties | This is often done through remortgaging and is common when raising funds to purchase a buy-to-let property. |
Conflict of interest | When both parties in a property deal can’t be represented by the same solicitor to avoid conflicts. |
Mergers and acquisitions | In the case of business transactions, seeking Independent Legal Advice serves to protect both parties' interests. |