It is a requirement in certain legal agreements where a person assumes risk or liability that the person receive independent advice from a solicitor. Lenders require that the affected person obtains the advice to prevent that person later claiming they were not aware of the risk or liability. This protects all parties to the legal agreement.
Even if the parties to the transaction are close family members or spouses, the advice needs to be sought. It ensures all parties understand the agreement and that no party is taking advantage of the other, even unintentionally.
Types of legal agreements where a lender might require this advice to be given include deeds of trust, occupier waivers or joint mortgage sole proprietor’ mortgages, where two people are responsible for a mortgage but only one has legal title to the property.
Requirement 1: the advice must be impartial
The advice cannot be biased in favour of or influenced by any party, including the lender. The advisor must give the advice by explaining the benefits and risks without being biased to any particular point of view.
Requirement 2: the advice must be given by an independent solicitor
The solicitor giving the advice cannot be acting for or employed by any of the parties or in any other aspect of the transaction. The solicitor also should not have any existing significant ties to any party. Of course, the solicitor must also be sufficiently knowledgeable and experienced to provide the advice in the client’s particular circumstances.
The solicitor must also explain their role to their client and that if the client later tries to claim they did not understand the agreement, the lender will argue that they have received independent legal advice.
Some solicitors are reluctant to provide this advice because the work is seen as high risk for relatively low fees. Solicitors with specialist conveyancing and property companies such as Sam Conveyancing are more likely to agree to provide the advice.
Requirement 3: there must be no conflict of duty or interest
The solicitor cannot owe any of the parties in the transaction any duties, except when providing the advice. They must not have any interest in the legal agreement: they cannot stand to benefit from the transaction they are advising on, other than the fee for the advice.
Requirement 4: the advice must be given in the best interests of the person seeking it
If all the above requirements are satisfied, then the solicitor will be able to comply with the final requirement to give advice in the best interests of their client. The advice needs to be accurate and helpful by outlining all the risks and benefits that need to be considered when deciding whether to go ahead with the transaction. The solicitor will need to be frank, honest and clear so that their client can decide whether to proceed.
After the advice is given
After the advice, it will be up to the party who has received the advice to decide whether or not they wish to proceed with the legal agreement. If they do, the solicitor should provide them with a letter to give to the lender to prove that the advice has been given. It is not the solicitor’s role to make the decision for them.