During a transaction, be it in a business or personal context, you may find yourself in a position where you are being told that you need to take Independent Legal Advice.
Independent Legal Advice is often required for a matter that is incidental to, but critical for the completion of a transaction.
Independent Legal Advice is generally required in the following circumstances:
- Personal Guarantees (where an individual provides a guarantee on a loan made to someone else)
- Director’s Personal Guarantees (on corporate loans and mortgages)
- Third party Mortgages (where the Borrower is not the same person as the person providing security)
- Occupier’s Consent to a Mortgage
- Transfers of Equity
Scroll down to find out more about our approach to each of these circumstances.
By entering into one of the above documents, you will usually be agreeing either to take on some form of liability, or to waive some of your rights, but without necessarily enjoying any direct personal benefit for doing so. It is therefore very important that you fully understand the implications and seek appropriate professional guidance.
However, being told to obtain Independent Legal Advice can sometimes be an unwelcome surprise. Too often the requirement is communicated late in the transaction, causing uncertainty, expense and delays as you try to find a law firm willing and able to give you the advice you need in a reasonable timeframe.
At Heald Nickinson, we understand that obtaining Independent Legal Advice is often time-sensitive and always critical to your matter. We don’t think that your transaction should be delayed any longer than it needs to be. We therefore offer a quick turn around at a reasonable cost.
If you require Independent Legal Advice please contact us.
ILA: Further Information
Personal Guarantees
A personal guarantee is an agreement where an individual (the guarantor) agrees to be responsible for the debt or obligations of another person (the borrower) if that person fails to fulfil their commitments. This is common in small business loans or financial agreements where the lender requires additional security.
The guarantor essentially promises to repay the loan if the original borrower cannot, which can pose significant financial risks. ILA ensures that the guarantor fully understands the extent of their liability and the potential impact on their personal assets before agreeing to such terms.
Director’s Personal Guarantees
Similar to personal guarantees, director’s personal guarantees are commitments made by company directors to be personally liable for their company’s debts in the event the company is unable to meet its financial obligations. This is often required by lenders when issuing loans or mortgages to businesses, especially for startups or small enterprises with limited trading history
The stakes are high, as directors could lose personal assets if the business fails to repay its debts. Obtaining independent legal advice helps directors comprehend the risks and legal implications of providing such guarantees.
Third Party Mortgages
Third-party mortgages occur when someone other than the borrower provides security for a loan, using their property as collateral. This arrangement is common in situations where the borrower does not have sufficient collateral but someone else, like a family member or business partner, agrees to secure the loan.
The person providing the security needs to understand that their property can be repossessed if the loan is not repaid. ILA is crucial to ensure that the third party understands their rights and obligations under such an arrangement.
Occupier’s Consent to a Mortgage
Occupier’s consent is required when a property is being used as security for a mortgage and there are individuals living in the property who are not the owners (such as tenants or family members). These occupants may need to sign an occupier’s consent form, acknowledging the mortgage and agreeing that their rights to occupy the property are subject to the mortgage.
This means they may need to vacate if the mortgage goes into default. We will ensure that occupants understand the legal implications of signing such a consent, particularly how it affects their residency rights.
Transfers of Equity
A transfer of equity involves changing the ownership structure of a property, either by adding someone to the property title (such as a partner or spouse) or removing someone from it (in cases of separation or divorce). These transactions can have significant legal and financial implications, including changes in liability and potential tax consequences.
Our advice is vital to ensure that all parties understand the impact of the transfer on their financial and legal rights, including any obligations to lenders or implications for future property sales or inheritance.
Each of these situations involves complex legal and financial considerations. Independent legal advice ensures that individuals are fully informed about the risks, obligations, and implications of their decisions, helping to protect their interests in significant transactions.
