Independent legal advice (ILA) is when a lawyer who is not involved in the main transaction gives advice to one party about the legal risks and consequences of what they are agreeing to. It ensures that the person fully understands their rights before signing the legally binding document. ILA is often needed in situations where you’re making important financial or legal decisions, especially when personal assets are at risk.
When might you need independent legal advice?
1. Director’s Guarantees (on Corporate Loans and Mortgages)
If you are a director of a company and you’re asked to provide a director guarantee for a loan or mortgage taken out by the company, you will likely need independent legal advice from solicitors such as Parachute Law. Signing a personal guarantee means that if the company cannot repay the debt, you may be held personally responsible for paying it. ILA ensures that you understand the risks to your personal assets before you agree to the terms
2. Personal Guarantees
You may also need independent legal advice if you are providing a personal guarantee for someone else’s loan.
3. Third-Party Legal Mortgages
In some cases, a person might offer their property as security for a loan taken out by someone else. For example, you may allow someone to use your home as collateral for their mortgage. If the borrower cannot repay the loan, the lender could take your property to recover the debt.
4. Occupier’s Consent to a Mortgage
When a person lives in a property but is not part of the mortgage agreement (for example, a spouse or partner), they may be asked to sign an “occupier’s consent” form. This form confirms that they are aware of the mortgage and agree to move out of the property if the lender needs to repossess it.
5. Transfers of Equity
When ownership of a property is being transferred from one person to another, independent legal advice may be required. This often happens during events like divorce or when someone is being added to the title of a property.
