A lender may require a guarantor of a loan to obtain independent legal advice before giving any guarantee. A guarantor is an individual or a company, who will be responsible for meeting the borrower’s obligations under the loan agreement if the borrower fails to do so.
What is a solicitor’s certificate?
A solicitor’s certificate is a document issued by a solicitor, who confirms that legal advice has been given to a guarantor in relation to a loan document.
How to obtain a solicitor’s certificate
Before meeting with the guarantor, the solicitor will review all the security documents. Guarantors should also review these documents and raise any questions at the meeting.
i. Verification of Identity
To safeguard against fraud, the solicitor will verify the identity of the guarantor. This verification of identity is done in person by checking the guarantor’s original identification documents, such as a current passport and driver’s license. The solicitor will make copies of these documents and provide certified copies as required by the lender.
ii. Legal Certification
Once the identity of the guarantor is verified, the solicitor will explain to the guarantor:
- the nature of the security documents;
- the guarantor’s liabilities if the borrower fails to repay the loan or meet other obligations; and
- the potential risks involved in giving a guarantee.
The solicitor will then prepare and provide a solicitor’s certificate.
A blank copy of the solicitor’s certificate is usually included in the security documents. However, the certificate provided by the lender may not always be compliant with each State’s regulations. For example, in Victoria, solicitors must provide certificates that are compliant with rule 11 of the Legal Profession Uniform Legal Practice Rules 2015 which can be found here.
Guarantors should seek advice from a solicitor to ensure the solicitor’s certificate provided by the lender are compliant.
Legal and Financial advice
Before giving a loan guarantee, seek legal advice to fully understand the responsibilities and risks associated with becoming a guarantor. For any financial questions, such as the borrower’s ability to repay the loan, we recommend seeking independent financial advice.
It is important for a guarantor to carefully review and understand the terms of the loan. For information on what to look out for when reviewing security documents, please see our article here.
How can W Legal help?
Contact our property lawyers at hello@wlegalgroup.com.au or give us a call if you to book an appointment to obtain legal advice and certification on loan documents.
