If you are a guarantor , borrower or lender, you may be required to seek independent legal advice before you sign loan and mortgage documents. Lenders often require an Independent Solicitors’ Certificate to prove that you have received legal advice from a solicitor prior to signing loan and mortgage documents. This process involves more than a simple signature.

What is a mortgage?

A mortgage is a type of security for a loan used to purchase a property. Parties involved in this form of legal agreement are.

1. A lender loans money to a business or person wanting to buy the property in the expectation that the funds will be repaid;
2. A borrower promises to repay money received from the lender;
3. A guarantor agrees that, If a borrower defaults on repayment of the loan, they will repay the debt.

Why do I need independent legal advice to sign mortgage documents?

A lender may request an Independent Solicitors’ Certificate to confirm that the terms of the loan and mortgage have been explained to, and understood by, the guarantor or borrower. It is the solicitor’s responsibility to advise the signatory of the conditions of, and the obligations imposed by, the mortgage and loan.

An Independent Solicitors’ Certificate verifies that the borrower or guarantor has been informed of their rights, liabilities and obligations under the conditions of the mortgage and loan agreement.

What legal advice will my solicitor offer on mortgage documents?

Solicitors providing advice on loan and security documents must comply with the Legal Profession Uniform Legal Practice (Solicitors) Rules 2015.

Your solicitor should verify your identity and ask you to sign an approved Law Society of NSW declaration or acknowledgment as evidence of the legal advice provided.

Your solicitor may advise you on the following areas:

1. The costs and interest incurred if the borrower fails to make regular payments on time.;
2. Potential legal action against the guarantor or borrower for non-compliance with the terms of the loan agreement. This may include the possession and sale of the guarantor or borrower’s property to satisfy any outstanding debt; and
3. The guarantor’s legal obligations in rectifying the borrower’s default.

Your solicitor is not qualified to offer financial advice. Queries related to the financial aspects of the mortgage documents should be directed to a financial advisor or accountant.

How can I prepare for an appointment with my solicitor?

To avoid any complications when executing your mortgage documents, we recommend that before your appointment you:

1. Give your solicitor copies of your documents;
2. Familiarise yourself with the terms of your guarantee or loan documents;
3. Prepare a list of the questions you want to ask your solicitor;
4. Explain to your solicitor the relevancy of the documents to all parties involved.

Here to Help

Becoming a guarantor or a borrower can be risky if you are not aware of your rights and obligations. Contact us for independent legal advice on your mortgage or guarantee documents.