Independent solicitor’s certificate
Lenders require a solicitor’s certificate to ensure that the borrower understands and freely agrees to sign loan documents (or to provide a personal guarantee). Compliance by lenders and solicitors has increased significantly. By requiring a borrower (or guarantor) to obtain an independent solicitor’s certificate reduces the lender’s risk of any later claim by the borrower (or guarantor) that they did not understand the document at the time of signing.
Before the certificate can be provided, the solicitor is required to meet with the borrower (or guarantor) to explain the loan documents and the risks of signing. Also, the solicitor will be required to verify the borrower’s (or guarantor’s) identity. Scott Legal can provide this service.
If you loan money to the registered proprietor of a property or the proprietor provides a guarantee for the main borrower, the terms of the loan may include your right to hold a mortgage over the property until the loan is repaid. The mortgage will provide the lender (mortgagee) with the best security; in the event there is a default on the loan, the mortgagee may have a right to take possession of the mortgaged property or to appoint a receiver of the income of the property. A good loan agreement should be set out in plain language and include clauses which fit the bargain between the lender and borrower, including right of repayment of principal, early repayment, interest (including how interest accrues and in the case of default), costs and trigger for the mortgagee’s right to take possession and to take other enforcement action. Due diligence on the borrower should also be carried out to check the borrower’s ownership of assets, debts and capacity to repay the loan.