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What is a Legal Advice Certificate?

Increasingly banks and other financial institutions are requiring borrowers and guarantors to obtain an independent solicitor’s certificate in relation to their loan documents.  This is to ensure there is no risk on the bank enforcing their rights in the event of default by the customer or guarantor.

We often find that clients fail to realise what is involve when a solicitor is required to give a solicitor’s certificate or witness a signature for a guarantee or loan documents.

This article will hopefully shed light on the myths and explain more about what’s involved.

Whenever a solicitor witnesses a legal document or signs a solicitor’s certificate there is a presumption that they have provided the advice on that document and the client understands it.

If a solicitor does not properly advise a client of the full implications of the loan or guarantee this may leave the bank with a right to pursue the solicitor for any loss it suffers. If a customer or guarantor defaults, then the bank will be relying on the fact that the solicitor followed the required procedure to ensure the bank is able to enforce its rights. Solicitors have been sued by the banks where a customer proves they did not receive a full explanation of the documents and implications of signing them.  The potential monetary risk to a solicitor could be more than the value of the loan or guaranteed amount.

This is why a fee is charged for the service and the strict identification and advice process is followed.

The solicitor must ensure that their clients fully understand the terms of the loan or guarantee as well as any conditions or scenarios that could cause the person loss. It is important that the solicitor explains the implications and ensures the client understands the consequences.

To do this the solicitor must spend time and give careful consideration when reviewing the documents which are often lengthy and have different requirements depending on the bank. Usually there is a short time frame for the documents to be returned full completed to the bank prior to the settlement date which adds pressure to the process.

However, the solicitor is required to have a face to face meeting with the client and ensure they explain the details of what can be a complicated document in a manner the client understands.  They also need to take detailed notes of the advice they give and then confirm them in writing to the client to cover the requirements of the professional indemnity insurers of SPM Law.

 


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