What is independent legal advice?
If you are:
- borrowing money from a bank or someone else, like a parent,
- have some special vulnerability in relation to a borrowing arrangement (such as due to age, inability to speak English well etc),
- borrowing in relation to a self managed superannuation fund’s limited recourse borrowing arrangement, or
- perhaps going guarantor on a loan for a company or a family member for their loan,
then chances are you will be asked to get “independent legal advice” from a solicitor in relation to the loan and the security for the borrowing or guarantee.
The document evidencing the loan is usually a:
- Loan Agreement,
- Letter of Offer or similar
and may have accompanying terms and conditions etc.
Security for a loan arrangement usually takes the form of a:
Independent advice us usually required by the lender so that it cannot (easily) be argued later that the borrower or guarantor didn’t understand the gravity of the arrangements being put in place – so although you get the advice, it is really for the lender’s protection.
In order to give independent legal advice, the lawyer will read the loan and security documents provided, advise you as to the meaning and effect of them and discuss any risks.
You will then be required to sign a document called a Declaration under oath confirming that you obtained independent legal advice before you freely and voluntarily signed the loan/guarantee/security documents.
Often the lender will also require the borrower or guarantor to obtain “independent financial advice” from a financial advisor, accountant or other appropriately qualified person. Lawyers, simply by virtue of their profession, possess no special skill to give financial (as distinct from legal) advice.
For further information, please contact McKillop Legal on (02) 9521 2455 or email email@example.com
This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.