Understanding the risk – Certificates of independent legal advice - Palmers Solicitors

Understanding the risk – Certificates of independent legal advice

Understanding the risk – Certificates of independent legal advice

Entering into a financial loan agreement or granting security/guarantee create legal obligations to comply with the terms of the agreement – with potentially significant risks for those liable if repayments are not made.

Due to this potential for risk, lenders often require borrowers to seek independent legal advice and fully understand the agreement they are entering into.

In certain circumstances, lenders will typically require evidence that all borrowing parties or those granting the security/guarantee have sought this advice in the form of a certificate.


The lender needs to ensure that the individual understands the financial risk they are taking, that they are not being pressured into the agreement and that there is limited risk that the security/guarantee being guaranteed to will be challenged on the grounds of duress.

This is beneficial to both parties, as the lender is less likely to face accusations of irresponsible lending and the individuals are more likely to carefully consider whether they can and should take on the debt and or grant the security/guarantee.

Who needs a certificate?

The typical circumstances in which parties will need to seek and prove independent legal advice:

  • Entering into a joint loan such as a mortgage;
  • Offering personal assets as security against a business loan;
  • Someone is guaranteeing the obligation of someone who is borrowing money from a lender.

These scenarios involve increased personal risk as opposed to traditional, single borrower loans.

For example, when two or more people take out a joint loan, they typically become jointly and severally liable to make repayments unless stated in writing otherwise.

This means that, if one party fails to pay their portion of the loan, the lender may pursue the other borrower for the full amount.

Similarly, company directors may take out a ‘secured’ loan – one which offers a larger borrowing potential because the borrower as used their personal assets to assure repayment.

If someone in this position had doubts over whether they could make appropriate repayments and failed to understand the risks, their assets could be at significant risk.

How to access independent advice

It is absolutely normal to be asked to obtain legal advice before proceeding with certain types of loan.

It is possible to obtain a certificate of independent legal advice from any qualified Solicitor, licenced Conveyancer or qualified Legal Executive.

The costs will vary depending on the instructed firm or provider, but should not usually exceed £1,000 (plus VAT and disbursements).

What will independent loan advice involve?

The process of obtaining independent legal advice will involve each borrower or grantor of the security/guarantee individually meeting with a solicitor without the presence of any other party or borrower. Some lenders will permit this can be done in-person or via video call.

The solicitor can explain the legal and financial implications of the proposed agreement and safeguard the lender or other borrowers from accusations of undue influence.

Following the meeting, the solicitor then provides an Independent Legal Advice Certificate, which will be sent directly to the lender.

This will assure the lender that the individual has been made aware of the risks and is still willing to sign the agreement of their own will.

We can provide impartial, straightforward advice to anyone considering taking out a loan where there is increased risk to their personal assets.

Contact Dashna Morarji-Sagoo by emailing DashnaMorarji-Sagoo@palmerslaw.co.uk or calling 01375 484443 or BJ Chong by emailing BJChong@palmerslaw.co.uk

The contents of this article are intended for informational and educational purposes only.