Independent Legal Advice (ILA) is a formal process where a solicitor advises an individual on the legal implications of entering into a financial arrangement—typically where they are being asked to guarantee or indemnify a borrower’s obligations to a lender.
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This commonly arises in situations such as:
- Limited company mortgages, where directors or shareholders are required to personally guarantee the company’s borrowing; and
- Family-assisted mortgages, where parents or relatives support a child or family member by providing a guarantee or security.
In these circumstances, lenders will require confirmation that each individual providing a guarantee or indemnity has received independent legal advice before the transaction can proceed.
Lenders impose this requirement to ensure that:
- The individual fully understands the nature and extent of the financial risk they are undertaking;
- The guarantee or indemnity is entered into freely and without undue influence or pressure; and
- Importantly from the lender’s perspective, the arrangement is legally enforceable, reducing the risk of future disputes or challenges.
During the ILA process, the solicitor acts solely in the interests of the individual providing the guarantee or indemnity (not the lender or borrower). The solicitor will typically:
- Explain the legal documents in clear terms, including the guarantee, indemnity, or any supporting security (such as a charge over property);
- Outline the extent of liability, including whether it is limited or unlimited and under what circumstances it may be called upon;
- Highlight the financial risks involved, including the possibility of being required to repay the full debt if the borrower defaults;
- Discuss the practical consequences, such as the impact on personal assets, creditworthiness, and future borrowing;
- Ensure the individual understands that their liability may continue even if their relationship with the borrower changes; and
- Confirm that the individual is entering into the arrangement voluntarily and with full understanding.
Independent Legal Advice is not a mere formality or “signing exercise.” It is a detailed and structured process designed to protect all parties involved.
Typically, the process includes:
- Reviewing the lender’s documentation in advance, such as a mortgage deed, terms and conditions, loan agreement and Solicitor’s certification;
- A private meeting in person or a vide call to ensure advice is truly independent;
- Opportunity for the individual to ask questions and consider the implications; and
- Formal certification to the lender confirming that appropriate advice has been given.
We provide clear, pragmatic advice tailored to your circumstances. Our aim is to ensure you fully understand your position and can make an informed decision with confidence.
If you have been asked to obtain Independent Legal Advice in connection with a guarantee or indemnity, please contact us to enquire – we will usually need to see the documents in advance in order to provide an estimate, as each lender’s requirements may differ. arrange an appointment.
To speak to one of our lawyers, call us on 0191 416 2182 email on info@donkinlaw.co.uk or complete a Free Online Enquiry.
